Email of the day On when to buy individual Autonomies
Comment of the Day

December 09 2013

Commentary by David Fuller

Email of the day On when to buy individual Autonomies

“In view of your comment about buying autonomies low.

“In practice it's so difficult to interpret what is causing them to be low! Take a look at Experian (EXPN on LSE).  Do I say "no this has clearly lost its upward trend consistency, keep away" or "here is a unique opportunity to buy this autonomy low"? 

The recent downdraught was caused by a sell rating from Goldman Sachs, fearing lower growth.  Other analysts have buy ratings.  What to do?

“In the past I have been guilty of always buying into good trends, which then topped out and went down. I am a little afraid to get into the opposite habit now of ignoring the good trends because the shares are too extended, and just buying losers.”

David Fuller's view

Thank you for an interesting question of general interest.  You will appreciate that your questions are more challenging after a bull market of five year’s duration, albeit from a very low level.  In other words, the risks are higher today, any way you chose to measure them..

In 4Q 2008, Experian and most other shares were very oversold relative to their 200-day MAs, and with widespread evidence of climactic selling, most were recovery candidates.   Today, I like Experian more following the shakeout than when it was last very overextended in May, but it has lost uptrend consistency, as you point out.  That also happened at a considerably lower level in 2011 and the share recovered, as we know.  Therefore I would like to see it back above the MA within this range, before considering a purchase, as that would also indicate a downside failure.

From your last paragraph above, I conclude that you like to buy trending markets.  Fair enough, but try to do it on fresh breakouts or after mean reversion to the MA.  Also, the next share you buy should have one of the best overall patterns, in your opinion.  I think you can find other Autonomies to rival Experian following its loss of uptrend consistency.   

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