Buying Shares Low?

lvader

consumer23 wrote: »

e.g Lloyds Banking Group (in 2007 before the turmoil they were up at nearly 600p per share, now they are at 33p a share).

Similarly RBS were at around 600p per share during the same time in 2007b and now are a mere 22p per share.

The thinking is that they will return to their heights of 600p per share eventually and if they do, then I'll be quids in if I invest now.

All those banks diluted the shares by several multiples, i.e. there are vastly more shares in those companies than there was in 2007. In effect the lloyds share price would have been around 55p in 2007 had there been the same number of shares issued.

darkpool

ever looked at a share and thought "if it falls to a certain price i'll buy some"?

do you fancy getting paid good money for buying the share at that lower price? and if it doesn't fall to the lower price do you fancy keeping a big wedge of dosh?

well if you do google "derivative writing"

gozomark

atush wrote: »

Buy low, sell high- the holy grail.

there are plenty of others who prefer "buy high, sell higher..."

atush

Buy high, sell higher is still buy low sell high.

And there are plenty who piled into gold recently and lost 10-20% in short order?

You can make money in rising markets. you can lose a bundle if you are still piling in when a price correction occurs.

jamesallen

consumer23 wrote: »

X

Of course the theory has merit, but the problem is knowing when shares are sufficiently "low". The stock market seems very depressed compared to what it was pre-recession or even a few weeks ago, but it could go a lot lower yet.

Quite a few people (including me) think that Greece will end up defaulting on a significant portion of its debts, and that the Euro crisis won't go away. IMO, unless you are an incredibly savvy investor, it's best to steer clear of shares until the whole Greece thing has either blown up or gone away.

Thrugelmir

lisyloo wrote: »

Personally I don't believe the market is behaving rationally at the moment and is driven by fear.

The fear is that banks will need recapitalising in some form. Bank share prices have fallen globally. Not just the UK.

MoneySaverLog

It makes sense to buy low and sell high.

However comparing Lloyds Banking Group back then to now, considering they have been forced to sell hundreds of branches and save a failing bank (Halifax) by HM Government, is wrong.

They do seem cheap though, but this is not a recommendation ;-)

IronWolf

dealer_wins wrote: »

A share in a company, like nearly everything else you can buy or sell, is only worth what someone else is willing to buy it at.

That's not true. Shares have intrinsic value and are sometimes worth far more than people are willing to pay for them.

For example if I had a share that was paying a dividend of 6p, was a solid company thats been around for 100 years, and over the last 20 years has increased its dividend at around the rate of inflation (not growing anymore), through thick and thin, then that share might have a conservative value of around 100p, yielding 6% as it has no real growth.

But the market price could be 80p, maybe because everyones afraid of a recession in the next year or two. If I believe the dividend will not be cut, then that share is still worth 100p to me, even though noone would buy it from me for 100p

lisyloo

The fear is that banks will need recapitalising in some form. Bank share prices have fallen globally. Not just the UK.

I agree that banking is a special case to the general market.

gozomark

atush wrote: »

Buy high, sell higher is still buy low sell high..

no it isn't.... I'll agree its buy lower, sell higher, but it certainly isn't buy low, sell high


buy low is about trying to second guess the market, buy high is about following the market - both can work, both can fail, but they are far from the same thing