So here's another strategy that I employ from time to time. Today I used it.
LuLuLemon (LULU) sold off big time today due to the CEO announcing she was stepping down. There was no reason given for her departure -- but the company just came out with blow out --- as in great --- numbers for the quarter. Sales were up huge - profits were good etc.
But the shares were at $81 -- and this morning are under $70....
I'm taking a giant leap of faith here and thinking that numbers (business) is good... and maybe the CEO is just simply leaving. Sometimes people actually make or have so much money - they just don't need or want to work anymore. :>)
So I owned 1000 shares @ 80ish. This stock pays NO DIVIDEND -- so I never invest much in just plain "growth" stocks. That's because of my own personal situation. I just don't really need the gamble of pure growth.... I like the income and some growth that dividend stocks give me. But I'm certainly not against growth stocks. I just own them in very small numbers rather than my usual 10 and 20 thousand shares per name -- I'll buy 500 or 1000 or maybe 2000 shares.
So with the shares almost $12 below my cost level -- I BOUGHT 3000 more shares. With this purchase -- I now own 4000 shares @ $72.75 -- and IF -- BIG IF -- the shares manage to get back to say $75ish -- I'll sell off half... get some cash back -- and end up (hopefully) with a lower cost basis going forward.
My "theory" in doing this is that while I might not have a gain -- I should be closer to where the market is currently. I would only do this in a name that I truly believe is a good well run company regardless of the "market" conditions.
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A CAVEAT here...... I once owned 8000 shares of a company that started to go down because interest rates were rising.... as it went down - I doubled up - to 16,000 - then again to 32,000 shares and so on. I finally threw in the towel when I owned 93,000 shares and it was "only" down a buck a share. So this theory doesn't always work. But 9 times out of 10 it has for me.
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