This year, Amazon.com’s Prime Day is October 13-14.
Prime Day is huge. Amazon keeps sales figures to itself, but it did say more than 175 million products were sold during the last two-day event. Analysts estimate the total sales topped $7 billion.
Last year, Prime Day 2019 became Amazon’s biggest sales event … easily beating its previous Prime Day, Black Friday and Cyber Monday sales.
And that’s what gets me scratching my head: How come we love buying stuff when it’s on sale everywhere but in the stock market?
In fact, the opposite actually takes place. When prices on stocks fall, people sell … not buy!
I have yet to see someone in the supermarket say: “Dang, ground beef is cheaper per pound than last week. No way am I buying. I’ll wait for the price per pound to go higher.”
Yet, the exact opposite happens when people invest.
They sell low and buy high. In other words, they dump their stocks when prices fall and buy them back when they are rising.
Let me let you in on a secret that I’ve learned from being on Wall Street for close to 40 years: You’ll never get rich doing that. The real money is made by buying low and selling high.
I think this answer is pretty simple.
When you buy a product, let’s say one pound of Red Delicious apples, you have some idea what the price should be … even if you never bought them.
I don’t do the grocery shopping in my home. However, if my wife asked me to buy a pound of Red Delicious apples, I wouldn’t spend more than $2 to $3 per pound. Any higher than that and I wouldn’t buy. If the price was $0.50 or lower, I would think that is a great buy. (By the way, the average cost of a pound of Red Delicious apples is around $1.40.)
And that’s my point: You may not know the exact price, but you have a pretty good idea.
That’s the reason people sell when prices go down, and buy them when they go up — they really have no idea what the stock price should be.
They forget that a stock is really a piece of a business, and they have no idea what the business is worth.
Before I buy any stock, I have a pretty good idea of the underlying worth of the business. I first figure out a ballpark price for the business. That isn’t hard to do if you know what to look for.
Once I figure out the underlying worth of the business, I then see if the stock price is trading above or below that price. If the stock is trading for $20 per share, and I estimate the business is worth $50 per share, I buy the stock.
If the stock price is trading for $100 per share, I’m not interested.
That’s why if the stock price fell to $10 per share, I’d be buying more. If you know the underlying worth of the business, lower prices are your friend. And the further the stock price goes down the happier I get.
But if you don’t know the underlying worth of the business when you buy the stock, you’re at a big disadvantage. You don’t know if $20 is a bargain price or an expensive price.
Alpha Investors Know Better
My team and I dedicate hours of research to every stock we recommend in my Alpha Investor service. We pour over financial filings, company statements and our own data. This is what we love to do.
I hear from readers all the time that the average person doesn’t have the time or experience to do this … and that’s why they turn to Alpha Investor.
We take the guesswork out of researching stocks. We do the research for you. Every month in each Alpha Investor Report, you’ll find our research laid out for you. You don’t need to wonder why we picked each stock. We tell you.
And we won’t bog it down with a bunch of jargon or financial speak. We show you in plain language.
It’s like having me looking over your shoulder telling you what’s worth buying and what’s not.
If you’re not already one of my Alpha Investors, it’s not too late.
We recently launched the American Prosperity Summit — where my guests and I laid out how everyday Americans can use these ideas.
The American Prosperity Summit is completely free. Check it out here.
Regards,
Charles Mizrahi
Editor, Alpha Investor Report
