The only reason you should EVER BUY a stock is that you think the business is worth more than it's selling for - not because you think a greater fool will pay more for the shares a few months down the road.
The best way to MITIGATE YOUR INVESTING RISK is to pay careful attention to valuation. If the market's expectations are low, there's a much greater chance that the company you purchase will exceed them.
Buying a stock on the expectation of POSITIVE NEWS FLOW or STRONG RELATIVE STRENGTH is asking for trouble.
This one came back to haunt many people over the past few years. Although it's certainly possible that another investor will pay you 50 times earnings down the road for the company you just bought for 30 times earnings, that's a VERY RISK BET to make. Sure, you could have made a ton of money in CMGI or Yahoo! during the Internet bubble, but ONLY IF YOU HAD GOTTEN OUT IN TIME. Can you honestly say to yourself that you would have?
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