To make money in stock investing, you need to wait for the perfect pitch to buy into securities. After you buy into a stock, you can trust the management to do their job and monitor the progress of the business’ performance. Stock price will take care of itself.
Even if you like the company very much, if the company does not trade for at least a 25 percent discount to intrinsic value, do not buy that stock. After extensive research you can create a spreadsheet with the list of stocks that are passing the majority of the checklist items. You can calculate the intrinsic value of the companies and add that information to the spreadsheet. You can add another column in the spreadsheet for buy price. You can increase the discount-to-intrinsic value depending on the earning patterns of the particular company. You can also create a portfolio on http://finance.yahoo.com and monitor the stocks, but always wait for the perfect pitch.
Whenever the monitored stock price goes below your purchase level, you can buy into those stocks. At other times, you can ignore the market prices. You should not violate this rule at all. If you violate it, you will end up paying more for the stock and encounter a loss in that investment. When you find bargain opportunities you can invest a higher percentage of the portfolio. You need to adjust your investment size as explained in Chapter 26, Portfolio Management.
Warren Buffett follows the same kind of process. He follows the company for a very long ...