When catching falling knives, I want to be absolutely certain of the value that I am buying. Like buying $1 for 50c. That way, even if they fall below my buying price, I still have the conviction to hold for the long term. I only want companies that have these characteristics:
- Must have a recurring income stream, selling products that people will still use in a recession. Usually selling cheap, consumable goods for cash (e.g.: hamburgers, train rides, etc). Not for example, selling corporate IT systems or oil rigs.
- Should have a projected PE of 8 with small projected growth. May have a larger PE of 12 or 13 if they have projected continuous annual growth of around 20%. These are the type of valuations I saw in the 01/02 bear market.
- I prefer to deal with companies that have most of their operations in developed countries. I will halve the amount I buy for companies that have their main operations in third-world countries like India, China, Indonesia, etc. And I would not use CPF money for them.
- The usuall stuff abt having some sort of defensive moat or compeditive advantage their operations, as well as a good balance sheet also apply.