When Can You Buy Stocks on Sale?

I often talk about buying stocks on sale and I thought: why not use this occasion Black Friday and Cyber Monday to share more information with you about the concept of stocks going on sale.

I absolutely love buying great items on sale and some of my favorite wardrobe items are bought on sale. One time I was in Stockholm on a business trip and on my way back from the trade fair I went to a design store in the city. The store had a sale and because the Swedish currency was very weak at the time I was able to buy two designer bags at a 90% discount. 70% sale and the 20% was because of the weakness of the Swedish Krona. It was high quality purses at an incredible bargain price and I use the bags frequently and I'm so grateful to own two beautiful leader bags of a high quality.

And stocks go on sale too. Let me explain how you should buy quality at a discount in the stock market.

Whether we're talking about socks or stocks, I like buying quality merchandise when it is marked down.

Warren Buffett

First, let’s dive into the concept of quality – because you can buy stocks that aren’t quality and I want to make sure that it’s quality you get when shopping the sale. If you want to read about quality businesses please read about my first steps to finding a wonderful company.

Once you've found a quality company, you’re ready to wait for the sale. And companies go on sale all the time, but it’s not like Black Friday: something you can plan for – it’s something that requires patience and following your quality company in the news. Because quality companies go on sale when an “event" happens. An event is when something happens that causes the crowd of investors to sell the stock, so the stock price drops.

Examples of quality companies going on sale

Lululemon, an active wear company, went on sale when a founder of the company made a comment about the yoga pant not being fit for all body shapes. This controversial comment made investors sell the stock, but the value of the company was the same and the company have continued to thrive and grow. Investors who bought the stock at the low price bought it on sale.

Google went on sale because the revenue slowed down. At the time the company was still growing, but for one quarter the growth wan not high enough for some shareholders that sold the stock and for the investors who understood the business, it was an opportunity to buy at a great discount.

In March 2020 – the beginning of the Covid-19 outbreak – a lot of businesses went on sale and I was one of the investors who was able to grab some excellent deals. Great companies that went on sale. I had done my homework; I had waited patiently and now it was time to buy big.

These days because of supply chain issues and inflation some businesses go on sale. The shareholders that sell might not understand that this is a temporary event, that this event will certainly rock the boat, but that long term this will not change the trajectory of the business and the investors who’ve used a checklist and know the company will be able to grab great businesses at a bargain.

When not to buy on sale

I have two examples of sales you do not want to participate in. One sale is companies that aren’t quality. Companies with a lot of debt or with no growth. When they go on sale we do not want to buy. We don’t want to own companies that aren’t quality businesses regardless of the price.

The second example is Black Friday sales. Some brokers actually have Black Friday sales where they give a discount on ex. the commission fee. I see people planning on buying stocks as this kind of sale. But saving a dollar or two, doesn't make a difference in the long run (if you buy at $50 or $52 hold the stock and sell it for $500 the 2 dollars make veery little difference). And if the stock you buy is overpriced then the $2 you've saved means nothing. This is not what I mean by sale, so don’t get carried away by broker sales.

I hope that you get to experience the joy of finding a wonderful company. That you get to experience a time where you know that it's your time and that you're ready for the next step: to buy a stock at a discount.