When I’m answering viewer questions on if a stock is a buy/sell/hold, these are some of my key considerations.
- Fundamental: Do I want to own it at all?
- Fundamental: What is the current valuation relative to historic valuation?
- Fundamental: Has anything changed recently to increase the value?
- Fundamental: What is consensus 12 months forward?
- Technical: Is the stock over/under performing on trend?
- Technical: Is it a good time to enter now overbought/oversold?
- Technical: Where is it relative to trend of past few years?
At the recent lows for Microsoft, we were getting several of our indicators lining up to tell us that it was a good time to enter the stock. We will see what they have to say about go forward earnings. At the 2025 peak, it was a bad relative set up. We are not surprised it’s rallied hard off the recent lows.
If you want to beat an index, you need to own more of what is likely to perform better and less or not of what is not likely to perform better. There is a challenge valuing stocks in this way that do not have positive earnings per share or stocks that have the potential for explosive growth profiles like Nvidia or many of the AI names that investors are speculating on today.
My style of investing tends to miss some of these explosive speculative rides because of my more value (or relative value) oriented style. Tesla is a company now that I’ll likely will not own, though I did briefly last hold it in 2022. I do own a Tesla car and could own a robot one of these days too.
