The 40-Year-Old Collector

Since the beginning of the year, the market expectations have been that there is only so high it can go before it retreats.  By the middle of the year, the focus of media attention was on its improbable upward mobility, citing that it had been nearing three years since the last market correction in October 2011 (defined as a 10% drop from its all-time high).  There were murmurs of QE3 causing the drop as it triggered previous sell-offs, but still, nothing more than 10%.  There were plenty of online articles to read predicting that the market would peter along through the rest of the year, continue to rise toward 18,000, or retreat into a bona fide correction, but as always, no one knew for sure.

Then, October 2014 started.  The volume of trading on the Dow went into overdrive, logging its best trading day of the year on Wednesday, October 8, 2014, and its worst on Thursday, October 9, 2014, moving 275 points and 334 points, respectively.  Even Tuesday, October 7, 2014, saw the Dow fall 272 points.  The following week, the Dow continued its slow and steady decline, despite Friday, October 17, 2014, being heralded as a market rally.

Myself, I have been patiently waiting for a market correction, preferably 15-20% to test my diversification strategies employed earlier this year, but also to buy in to a few individual stocks that I have been eyeing for the past several months.

While buying individual companies is new to me (hitherto, I have been strictly a mutual fund investor, and low-cost indexing for the most part), I have often been a collector.  Whether it was G. I. Joe toys, wrestling magazines, compact discs, or VHS/DVDs, I habitually buy and hold.  As I am pushing 40 now, my interests have simply changed from toys and other entertainment to a more lucrative hobby.

It fittingly started with $WWE.  After it plummeted from a $30+ high to almost $10 this May, I decided that, if the stock dropped below $10, I would buy it and hold until it reached $20, then pick it up again the next time it fell below $10 (a common trend for the stock price over its 15-year history). Unfortunately, the stock itself did not cooperate with my plans, remaining over $10 so far this year. However, I reasoned one key to individual stock trading over long-term ranges is patience. Additionally, I assumed a market correction was nearing, at which point the stock price would surely fall below $10.  (Still waiting.)

During this time, I started compiling a "wish list" of other companies that I would like to buy for the right price.  After deciding to buy $WWE, I considered what other companies would be like WWE, whose rise to $30 was highly improbably considering its $10-$20 historic range.  For the most part, $WWE went up so high because it had launched its innovative online WWE Network.  I pondered what other corporate brands could have the luxury to duplicate that product.  The only one that I could rationalize was $DIS.  Like WWE, which has monthly pay-per-view events, weekly television shows, and a long history for its fans' entertainment, Walt Disney Co. would have annual movies, an ongoing cable television channel, and a long history for its fans' entertainment.  Like WWE, Disney has an enviable amount of die-hard fanatics.

Additionally, I considered some of my personal favorite brands.  Leading the pack were $PEP and $YUM.  I also considered how the oncoming Internet revolution would continue to radically change the way consumers do business.  I almost immediately eliminated any "brick-and-mortar" business, aside from fast food, until I considered that grocery stores would probably be the longest surviving stores.  Therefore, I added $KR to my wish list since its national reach would likely keep it afloat for as long as feasible.

Aside from my favorite brands, I have stayed open-minded to some companies that I would have never considered but-for their high-risk/-reward stocks.  If you call a spade "a spade," then call my wavering interest in these companies "greed."  The Motley Fool (of which I am NOT affiliated, despite my surname) often encourages its readers to buy suppliers for future technological revolutions.  If television were replaced by Netflix or Roku and the like, but you are unsure which brand will succeed, then buy what they all have in common.  For example, GT Advanced Technologies Inc. ($GTATQ) was heralded as a sure-fire winner before $AAPL released its latest iPhone since they were contracted to supply the virtual scratch-proof sapphire screens. Unfortunately, things went horribly awry, and the iPhone did not use these screens, leading GT Advanced Technologies to close a plant in Mesa, Arizona, and file Chapter 11 bankruptcy shortly thereafter.  Its stock price went from a high of $20+ in July 2014 to under $1 in October.  I had a buy price of $10 for that stock, so I dodged my first massive loss in the market (for full disclosure, I have bought some of its shares, primarily to follow the company and for the high-reward element if the stock price recovers).

I will be interested to see how my wish list grows and, of course, how long it takes to buy them all!