Price does matter in buying stocks for speculations. I want to make 50 to 100% profits on speculative capital. If I overpay for a stock, I would need a peculiarly unlikely correlation of good news and the support of momentum buyers to make a big profit. But if I buy at "a nice price", I can get my payoff with just one of those two principle boosters for a big price move.
Lately I've chosen sectors that I thing might benefit from good news that I anticipate. Then I survey the charts of stocks in those sectors to see which might be able to double on good news. How do I do that ? Easy, I just look at where the prior "normal" price level was in 2006 or 2007 before the Panic of 2008. If the economy does return to normal conditions and growth, a rapid return to those profits levels, and hence stock price, can occur or at least come close enough.
If I can't find good sectors or stocks that might double, I sometimes will shift tactics and find higher quality stocks that might go up 20%. Then I'll buy call options - usually one strike in the money and a few months of durations. Sometimes I ladder them with a few, cheaper, out of the money calls. Those can go up 50 - 100% IF my news comes through. Sometimes they go up in anticipation of the news, as occurred in September and early October. Whatever, take the sugar when it reaches your plate. Don't be a greedy pig.
If I have been a pig, I would have made next to nothing on my call options play of mid September, instead of the roughly 75% average profits that I did book.
Books of the Week
The title of today's blog is from a story in "The Bloodhounds of Broadway and other Stories by Damon Runyon". There's a companion volume, too, titled "Romance in the Roaring Forties and Other Stories by Damon Runyon". These particular collections were published in 1981 and 1986, respectively. If you've ever watched and enjoyed that great movie, "Guys and Dolls", you might appreciate that its characters and some of the plot comes from Damon Runyon stories that millions enjoyed in his newspaper columns for decades.
Runyon wrote about gamblers in New York City and their culture, using their colorful nicknames, attitudes and vocabulary and style of speech. "Guys and Dolls" borrows from "The Idyll of Miss Sarah Brown" which is contained in the second volume mentioned. "She is tall and thin, and has a first class shape, and her hair is light brown, going on blonde, and her eyes are like I do not know what except they are on-hundred-per-cent eyes in every respect." The "rolling for souls" ending of the story occurs in a slightly different manner than the movie, by the way.
The title of today's post is the title of story in the first volume. It's about gamblers and how they love to get "the right price", viz., odds. Specifically, they are excited about a rich Yale alumnus offering 3 to 1 odds on a rowing race with "the Harvards" as they say. Professional gambler, "Sam the Gonoph" says, "I do not know anything about boat races, and the Yalies may figure as you say, but nothing between human beings is 1 to 3. In fact, I long ago come to the conclusion that all life is 6 to 5 against." So they plunk down many G notes [$1,000 bills - yes, those existed in circulation then !] not because they like Harvard, but because "it's a nice price". The story ends spectacularly with quite a fine twist.
I recommend these books for very, very enjoyable reading. You might have to look in used book sites such as www. alibris.com or the used book offerings on Amazon.com to find them. I just looked and saw some offerings of these and other collections of Damon Runyon stories. By the way, I bought my copies in Penn Station in New York City in the 1980s when I worked on the "Street". There was a great little book store there that offered many eclectic books for riders of the Long Island Rail Road. Sigh .. it's gone now, of course.
Word of the Day
"Prosody" - noun [$10]
Prosody means 1. the theory and practice of versification; the laws of meter; 2. the study of speech rhythm.
Sentence: To understand and analyze a poem, one must consider prosody as well as simple rhymes and the meaning of the words and metaphors used. Bluntly, there's a reason why poems are written in verse.