This is a very good post but I have a slightly different take.
Yes you will get your timing wrong with FA. But a price based stop is not the answer if your entry is not price based.
I choose companies for my capital growth watch list based on FA. Companies with balance sheets that are in order with good growth metrics and with good capital gain potential. So, I use FA, intrinsic value, whatever, to determine the companies I'm interested in holding.
I have however become absolutely convinced that the entry must be made on the basis of price. Firstly, as most FA/value investors will agree, the price must be at a discount to their judgement of where fair value lies. I think this is implied even though you suggest one can purchase a stock without regard to its price.
Timing entry based on technical analysis, which I think is what you are alluding to, for me is imperative even though I choose stocks based on FA.
Just think for a moment about prices and markets from simple economics. Price is
the mechanism that reaches an equilibrium between supply and demand. It is the fulcrum point at which supply and demand are in balance. Like all markets, expectations shift the demand and supply curves. If buyers expect that prices may fall they will defer purchase and sellers will fulfil the buyers prophecy by seeking to sell before price falls further (supply exceeds demand -> price deflation). Conversely, if sellers expect that prices will rise they will limit supply in anticipation of receiving a higher price in the future whereas buyers will rush to purchase in anticipation of price increasing (demand exceeds supply -> price inflation).
Why wouldn't we expect value investors to also behave as rational economic agents in the stock market just like any other market? As tech/a mentioned in another thread about value investing, why would any investor incur unnecessary opportunity cost? The answer is of course that as individual economic agents we are not perfectly rational, we are humans. Collectively we would expect markets to tend towards rational behaviour in the long run. In the short run and as individuals we are constantly making imprecise judgements based on incomplete information.
The importance of price for me becomes so obvious whenever I run the figures when looking to buy for the income portfolio for my SMSF. This portfolio is paying pension income. As an example buying ANZ at $20 versus $23.30 represents a difference in yield (gross with franking credits) of 1.4% per annum. It's a significant amount. You'd shop around to get 1.4% off your home loan interest rate.
Following the trend should also reduce the chances of being falsely stopped, whip-sawed, out of a stock. Some people on these forums will tell you they can sit zen like upon their share portfolio without worrying about volatility knowing that in the fullness of time the universe will ensure that all their stocks will reach their true potential and will resonate to the cosmic singularity. I can't do that. I need to preserve capital and generate income and as we have witnessed in the past couple of years there is sufficient uncertainly and risk of significant cyclical swings in stock prices. Timing entry to the trend has become important to me in increasing the chances that I won't get unduly stopped out of a promising stock selection.
As for exiting based on price, every man has his price. Just as when I am willing to buy based on my belief that the price is at a discount to fair value, why wouldn't I exit when I believe the price is at a significant premium to the fair value? Why wouldn't I use a stop loss to lock in capital gains and preserve capital?
In this sideways market IMHO the trend is important and buy and hold is not necessarily the best strategy for capital gains.