A prolonged downturn from early 2022 has dampened enthusiasm among mass investors. A March report from Barron’s said retail investors, who were active during the pandemic rebound, have been much less active this year.
However, that doesn’t spell doom for long-term value investors, such as Warren Buffett, whose recent acquisition of Occidental caught the market’s attention.
Institutional investors disclosed their buys and sells during the first-quarter downturn by reporting13 filings.
Still taking $Berkshire Hathaway-B(BRK.B.US)$ as an example, in the first quarter Buffett also increased his investment in another oil company, $Chevron(CVX.US)$, and bet on video game maker $Activision Blizzard(ATVI.US)$, computer maker $HP Inc(HPQ.US)$ and insurance company $Alleghany Corp(Y.US)$.
Shares of $Occidental Petroleum(OXY.US)$ have more than doubled this year and gained about 40%* since Berkshire’s earliest transaction on March 2, 2022.
* From the open price of $48.4 on March 2, 2022 to the close price of $67.9 on May 17, 2022.
How to find stocks worth investing in?
Follow changes in institutional managers’ shareholdings.
What they are buying could provide you with a way of sifting stocks to watch. Plus, their selling also could be important to help adjust our portfolio.
Ways to track Buffett and other institutional managers' positions:3 steps to track changes for Buffett's Positions
It should be noted 13F filings provide investors with a look at the holdings of Wall Street’s top stock pickers, and many smaller investors have sought to use the filings as a guide for their investment strategies. However, there are problems with the completeness and timeliness of the data.
How to identify a better entry point?
Buying the dip is a common strategy, but its abuse in trading should be avoided. Generally, two scenarios provide a suitable entry point for buying.
1. The market has undergone a sharp and sufficient correction.
Once the market has squeezed out the bubble and digested high valuations, it's time to look for quality companies that are worth investing in.
Stable and growing earnings, high return on equity (ROE), high dividend yield, and positive cash flows are common indicators of a company’s financial success, indicating that the company could be a good investment.
Further reading: Indicators to evaluate the financial success of a company
2. Technical indicators indicate a potential uptrend or prices near a breakout.
Good tools could help us reduce risk or limit losses. Moomoo Learn has brought you the most commonly used technical indicators: How to identify an upward trend with Moving Averages?
For more suchlike courses, you can go to Learn – moomoo Tutorials – Advanced Level
Last but not least, institutional positioning changes, technical and financial analysis indicators are not golden rules for investing, these should only be used as a reference for our investment decisions.
However, when selling is not the only voice in the market, it bodes well for value investors who focus on undervalued opportunities and long-term potential returns.