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July 16, 2022, 8:22 a.m. EDT

‘I see buying opportunities.’ How this stock trader with 40 years of experience makes money in a bear market

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By Michael Sincere

Howard Kornstein, a professional trader with more than 40 years’ experience in stocks, options and futures, developed and fine-tuned his strategies while facing every imaginable market environment. He has little patience for those who claim they can’t make money trading, even during the current bear market. 

“This bear market is mild,” Kornstein says. “I see buying opportunities. Many people took money out of the market a few weeks ago as the market went down. Guess what? The market will go back up again, just like it always does.” 

Recently, he has been accumulating shares of Invesco QQQ Trust /zigman2/quotes/208575548/composite QQQ -0.79% because there was a significant selloff. “In the first week of July, the QQQ and SPY /zigman2/quotes/209901640/composite SPY -1.03% were good buys,” he says. He stops trading, he adds, when “the casino or table is too hot.”  

When will Kornstein sell QQQ? “When taking a trading or investing position, you must know when you’re going to sell before you even buy it. Based on technical analysis, I determined that $350 or above is my selling point for QQQ.” (Note: His target price could change in the future depending on variable market conditions.) 

Buy at the 52-week low

Kornstein uses a simple stock strategy that has worked for decades. “I find an established company whose stock has dropped to its 52-week low and is making a U-turn. This means the stock is recovering. This is a classic, dependable trade. When buying at the 52-week low, you have reduced your risk.” 

One indication that a stock has recovered is when the 20-day moving average crosses over the 30-day moving average (i.e., the simple moving average crossover strategy). According to Kornstein, that is a sign the stock may have bounced off its 52-week low and could be headed higher. 

Kornstein describes the type of companies he likes to scoop up at the lows: “The goal is to buy well-established companies that make tangible products, not intellectual properties. I have positions in Boeing /zigman2/quotes/208579720/composite BA +0.07% , Lockheed Martin /zigman2/quotes/200691238/composite LMT -0.72% , and Schlumberger /zigman2/quotes/201012972/composite SLB +2.21% . These are companies that have been around for a long time that sell real products. Nvidia /zigman2/quotes/200467500/composite NVDA -0.60% and Advanced Micro Systems /zigman2/quotes/208144392/composite AMD -0.13% are other companies that fit this criterion.”  Kornstein adds that he favors dividend-paying stocks, a strategy espoused by veteran investor Warren Kaplan — the subject of a recent MarketWatch feature .

Sell at the 52-week high 

When a stock makes a 52-week high, Kornstein sells. “I know in advance when to sell,” he says, “and one rule that I obey is to sell at its 52-week high. When I take on a position, I always identify in advance my exit price.”  

Kornstein cautions that the strategy of buying and holding forever is not dependable. “General Motors’ bankruptcy is a good example,” he says. “Always know when to get out of a position.”

Assume you’re wrong

Another Kornstein rule: After buying a stock, he always assumes that he is wrong about a position. That is one of the ways he reduces risk. Says Kornstein: “I accumulate a position by starting small with 10- or 25 shares. If it goes against me, I stop accumulating and wait. Everyone thinks that when they buy they will be right and make lots of money. But when it goes against them, many investors refuse to acknowledge this fact. They believe the stock will come back and are shocked when it doesn’t.”

Kornstein adds that many investors get too emotionally attached to their stocks. Then it’s hard for these investors to sell their losers.

Start small

Even though Kornstein has substantial positions, he always begins with small positions. “I might buy 10 shares at the end of the day. I put my money on the table. If I’m right, I will continue adding to the position. If wrong, I will sit on the position and see what happens. I never ever take large positions at one time. You scale or ramp in over time.” The key, he says, is to calculate in advance how many shares to buy.

/zigman2/quotes/208575548/composite
US : U.S.: Nasdaq
$ 279.76
-2.22 -0.79%
Volume: 53.49M
Oct. 6, 2022 4:15p
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/zigman2/quotes/209901640/composite
US : U.S.: NYSE Arca
$ 373.20
-3.89 -1.03%
Volume: 82.33M
Oct. 6, 2022 4:00p
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/zigman2/quotes/208579720/composite
US : U.S.: NYSE
$ 132.20
+0.09 +0.07%
Volume: 4.45M
Oct. 6, 2022 4:00p
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
$78.45 billion
Rev. per Employee
$427,768
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/zigman2/quotes/200691238/composite
US : U.S.: NYSE
$ 399.61
-2.90 -0.72%
Volume: 746,670
Oct. 6, 2022 4:03p
P/E Ratio
23.13
Dividend Yield
3.00%
Market Cap
$106.73 billion
Rev. per Employee
$562,868
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/zigman2/quotes/201012972/composite
US : U.S.: NYSE
$ 42.49
+0.92 +2.21%
Volume: 16.40M
Oct. 6, 2022 4:00p
P/E Ratio
23.22
Dividend Yield
1.65%
Market Cap
$58.80 billion
Rev. per Employee
$270,348
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/zigman2/quotes/200467500/composite
US : U.S.: Nasdaq
$ 131.30
-0.79 -0.60%
Volume: 64.42M
Oct. 6, 2022 4:00p
P/E Ratio
43.06
Dividend Yield
0.12%
Market Cap
$328.90 billion
Rev. per Employee
$1.32M
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/zigman2/quotes/208144392/composite
US : U.S.: Nasdaq
$ 67.85
-0.09 -0.13%
Volume: 98.33M
Oct. 6, 2022 4:00p
P/E Ratio
28.52
Dividend Yield
N/A
Market Cap
$109.68 billion
Rev. per Employee
$1.39M
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