Buy high, sell higher: The Nvidia model

Mark Newton, global head of technical strategy at Fundstrat, uses Nvidia (NVDA) as an example to illustrate his "buy high, sell higher" strategy. He explains why this approach can lead to better investment outcomes and warns against chasing the adage of "buy low, sell high."

Newton discusses his insights with Yahoo Finance’s Jared Blikre and Sydnee Fried on "Stocks in Translation." Listen to the full episode here, or wherever you get your podcasts.

This post was written by Jimi Corpuz

Video transcript

I would usually caution investors towards trying to uh you know, truly buy low, to sell high and think that you've captured the absolute low of any sort of sector that you're hoping is gonna be the next big thing because, you know, many times these laggard groups, they take quite a bit in, in a while for them to start to really strengthen.

And you know, any stock that's out or near 52 week lows is really gonna have a difficult time at clawing back.

So I, I'm almost always of the school that you buy high, sell higher, uh sell low or avoid low and cover lower versus thinking that um you know, you're gonna be able to buy something, it's at its lows just because of valuation purposes and you've ended up timing it correctly and that's where a lot of investors go wrong mark.

Can I ask you, you say buy high, sell higher?

So for something like NVIDIA today, and you don't necessarily need to say if you would buy it.

But if a stock is doing really well, like NVIDIA and it's showed for the past year or two years, is it still a time to buy today or should you wait for it to come down a little bit?

You know, honestly, a lot of those questions depend on your own risk tolerance and your time frame.

I would just argue, you know, it's important to pay attention to people like William o'neal.

Uh you know, who created investors Business Daily.

He wrote a book called How To Make Money On Stock, combination of fundamentals and technicals.

You know, typically he, he advised that some of his greatest investments for all time happened after a stock had moved to new all time high territory.

So he looked at those stocks that went up 123 400% or more.

And typically that happens as a stock, you know, you know, usually the stock has to show evidence of price strength before sometimes these larger moves happen.

So to answer your question, sometimes when the horse gets out of the barn, you have to go chase it because it might not come back.

Uh I own NVIDIA, I've been an investor in NVIDIA.

But, but uh you know, some of my analysis suggests that in the months ahead, that it might be wise to consider diversifying.

I haven't seen that on the charts just yet.

But, but uh you know, I'm paying attention to several different things for now.

You know, technology in general still makes a lot of sense to me.