Value Lessons and a Xerox Spin-Off
Over the years, I've found that if investors just stay away from a few bad mistakes, profits will soon find them, asserts value investing expert Charles Mizrahi, editor of Hidden Values Alert.
Unlike the New Year's resolutions that many find so hard to keep after only a few weeks, like exercising every day or shedding a few pounds, these mistakes are very easy to avoid.
The trick is to write them down and keep them handy whenever you make a trade. And then make sure you avoid them!
1. Buying stocks at high valuations:
An old Wall Street adage says that a stock bought right is half sold. If you pay too high a price for the stock of a great company, you most probably will not make much money at best, and lose at worst. If you avoid buying stocks trading at nosebleed valuations, you'll be well ahead of the game.
2. Buying financially weak companies
No matter how attractive a company's earnings are or demand for its product, it won't be in business long if it can't pay the rent. Companies with weak balance sheets are disasters waiting to happen.
When they fall short on cash, they are forced to take on debt or dilute shares, and that only spells trouble for shareholders. Stick with companies that have rock-solid balance sheets. Investing is tough enough; don't make it harder by buying companies that could go belly-up.
3. Give in to your emotions:
If there is one thing that all great investors have, it's the proper temperament.