The problem with a strategy of only buying stocks when they're clearly undervalued is that it's generally extremely rare for companies to actually trade at an obviously undervalued level. Generally, when their price is depressed below the level you'd expect based on their dividends and/or earnings, it's because there's some other black cloud hanging over their future earnings potential.
It's great in theory, but in practice it's not realistic to believe you can reliability know what a company's "reasonably projected future cashflow" really is. Even if they're in the most reliable business in the world, if someone comes up with a lower-cost alternative next year, all those future cash flows go poof.
Conversely, it's damn hard to tell when some stocks are overpriced. I remember folks saying in 2007/2009 that Apple was wildly overpriced at about $90. I heard the same things about Amazon over the past few years.
It's great in theory, but in practice it's not realistic to believe you can reliability know what a company's "reasonably projected future cashflow" really is. Even if they're in the most reliable business in the world, if someone comes up with a lower-cost alternative next year, all those future cash flows go poof.
Conversely, it's damn hard to tell when some stocks are overpriced. I remember folks saying in 2007/2009 that Apple was wildly overpriced at about $90. I heard the same things about Amazon over the past few years.