Video: Your Questions Answered - March 9

Bob and Chris answer AAP member questions in their regular Wednesday Q&A segment.

KATHERINE ROSS: Happy hump day. It's Wednesday, which means it's time for our Wednesday Q&A. I'm Katherine Ross, and I'm joined by Bob Lang and Chris Versace. Before we get started, I want to note that I have edited these questions for clarity. With that being said, Chris, our first question comes from Terry A, who's wondering, is it wise to nibble at lower price levels, thereby lowering the cost basis if it would take the percentage owned higher than wanted?

CHRIS VERSACE: Oh, Terry. We love to nibble and reduce our cost basis. Having said that though, we try to have a pretty strict rule around position sizes that we'll nibble up to. So I would say, granted, it's a tempting, tempting thing to do, but prudence is always critical. And with that, we have to keep an eye on potential risks. That Includes being outsized in a particular position.

You'll notice that when positions in the portfolio get a little outsized, what do we do, particularly if we have gains? We actually trim them back and recycle the proceeds into either new names or cash, depending on what's going on in the market. So again, I know it's tempting, but I would say nibble until you hit your threshold and then remain, and let the strategy or the thesis play out.

KATHERINE ROSS: Bob, a fellow Bob-- Bob F-- wants to know what after market indicators you follow for a heads up view of how trading will happen the next day.

BOB LANG: Well, Bob, I like your first name. After market indicators-- basically, there aren't very many to do because simply put, unless you're watching the futures market, which is what I pay attention to, which is called the ES futures-- it's the S&P 500-- which trades just about almost 24 hours. It stops trading about 15 minutes after the market closes, and it picks up again a little over an hour later.

So that's an indicator that I pay attention to. It trades all through the night. I'm also watching volatility indicators as well, too. Much like the S&P 500, it trades along with it in the middle of the night as well, too. And if you're really a night owl and you stay up all night, you might want to watch what's happening in Europe and what's happening in Asia. Because when they open up their markets, it does have an effect on what we're looking at.

I'll have a tendency to slap indicators, like the Bollinger Bands, or look at relative strength or something like that around the futures indicators that I look at. So those are pretty much really what you need to pay attention to. After hours trading in individual stocks isn't really a good indicator either, but certainly, those futures markets are the ones to pay attention to.

KATHERINE ROSS: And Tony R, Chris, is wondering with three-fold situation happening-- we've got increased inflation, rising interest rates, and the Russian invasion of Ukraine-- do you still feel that the price targets of the portfolio are attainable, and what kind of time frame are you looking at?

CHRIS VERSACE: Yeah. So let me take that last part first for Tony. Our price targets tend to be 12 to 18 months in nature. I think the heart of the question is, do we take stock of what's going on in the market environment and look to revisit our price targets based on feasibility? And the answer is yes. Of course, we do.

Whether it's moving them up based on improving fundamentals and earnings expectations, or if we have to call it back because things are developing slower than expected. Remember, just like the market, price targets are a living, breathing, organic thing that evolve over time and, of course, we will revisit our price targets as needed, Tony.

KATHERINE ROSS: Bob, Shahid K asks, when a company within the portfolio announces a buyback, do

you know what price they're buying back, how do they do it, and are they buying it from the open market or from regular shareholders, such as Shahid?

BOB LANG: Well mostly, they're not going through the market, especially if they're buying stock in size, because they don't want to necessarily tip their hand open to what they're doing and when they're doing it. So we really don't know when they're doing it. But suffice it to stay, most treasury people and CFOs of companies are pretty savvy when it comes to buying.

They know their prices, they know their stock, they know their company, and they can probably figure out a good level where they think that there's good value in that stock. Remember something. A stock buyback is simply a substitute for paying off a dividend. It's going to reduce the amount of shares outstanding, increase their EPS, and hopefully, it's going to increase their stock price from that.

But I think that they don't really go out in the open market to do that. They say that they do, but they're really pretty much buying it with the banks. And when a stock comes down, it's almost like you'd feel like that's a put option underneath the stock price, which means that the company, if they do have a buyback plan, has basically put in a floor on that price of the stock. So you'd feel pretty comfortable at least getting in right near where they are if they're buying it at the bottom.

KATHERINE ROSS: And Bob, I'm going to ask you to look into the future a little bit with this last question. Scott W is wondering, where do you think the market will be in 30 days?

BOB LANG: Good question, Scott. So after the markets have come down quite a bit and hit some support levels just a day or two ago. A month from now-- we're talking about towards the end of the first week of April-- I could see moderately higher from here, maybe 2% to 3% higher from here. We do have some resistance up about the 4,400, 4,450 level on the S&P 500, and that's been a difficult level to come back to.

We do have a few more weeks until the end of the month, end of the quarter. We do have a Fed meeting coming up next week, which could have an effect on the market. So I'm thinking about 3% to 4% higher from here before we see the market's next decision.

KATHERINE ROSS: All right, guys. Thank you for joining us today. And members, thank you as always, not only for asking these wonderful questions, but for joining us, as well. Please continue to send your member questions into Katherine.Ross@thestreet.com, and we'll see you next time.