So, you want to invest in the stock market? Well, mama told you there’d be days like these - didn’t she? If she didn’t, then she’s a fool, and nature abhors a fool. She also should have told you that nobody makes money panicing. So, don’t join the crowd and sell over macroeconomic conditions that do not necessarily affect your individual holdings. Look at what you own and hold on, because you bought value companies at a good price - at least that’s what I’ve been telling you to do.
The market is in “correction territory,” having dropped another 2.23% today, and closed at a level below the 200-day moving average for the first time since 2016. OK - that’s the technical stuff. What’s going on?
We have a President in the White House who Tweets his sick mind at 3 in the morning, blasting such stalwarts as Amazon and claiming that he has some grand idea that the US Postal Service is losing money because of them. Here’s a clue: The USPS has been losing money for decades, and it’s not Amazon’s problem. One of the goofy things he said was that he thinks that there should be a “level playing field” when it comes to retail. OK, so now he wants to re-invent capitalism and retail so that there shouldn’t be any sort of competitive advantage in the world. Wake up, Donnie.
Piling-on was Elon Musk, who thought it would be a good idea to Tweet an April Fool’s joke about Tesla going “bankwupt” and sent the world into a tizzie for, well - not much, even though many in the financial community have been wondering how Tesla can pay their bills without another stock offering. Many a truth was said in jest. Suffice it to say, I told you that Tesla was overvalued, and it’s likely headed lower than today’s $252 closing price.
I also said the same thing about Facebook, although I had no idea (nor did they, apparently) about the pending government investigation over their data sharing nonsense. Hey gang - it’s a free site. What did you think they were doing with all of those “Say Amen” and “What is your Spirit Animal” information? It’s not for your entertainment, trust me.
So - OK - what now? Well —- if you find a nice pair of shoes at a good price, and they go on sale next week, do you throw out your old shoes and buy a pair on sale? No. You keep the old shoes and buy a new pair because they are cheaper than when you bought them.
That’s why you stick with your conviction buys and buy more when they’re on sale. Tomorrow, everything will be on sale.
As for me, it’s Microsoft right now. There is nothing in this current environment that makes me believe that Microsoft is suffering. Their cloud business and Office 365 is going to provide growth for them. The stock is easily worth $120, and the current $89 price is a bargain. Giddy-up.
I’m also buying more Under Armour and DelTaco. The former is a huge bargain against its intrinsic value, and the latter is still a growth story that is independent of any tariffs or nonsense that Trump might Tweet. Management needs to control costs, and I believe that they can. At $10.30 a share, the stock is a huge growth discount buy.
There are a few others that deserve your attention. Among them, Disney, Walmart, Google, and General Motors. Tesla isn’t the only auto-maker getting hammered. General Motors trades at a low P/E and has an inside track on the driverless car thingy. At $35 a share, and a 4.11% dividend, it’s hugely undervalued.
Google is a stock whose baby has been thrown out with the bath water. It trades at a forward (expected earnings) P/E of 23, and is a compelling bargain here, both for the company itself and the prospect of those driverless vehicles, through its Waymo division.
If you’re the more cautious type (which can be expected here) you might want to go with some defense against inflation - which I also told you about. You could go with VTIP, which is the Vanguard Short-Term Inflation-Protected Securities ETF, which pays a lusty 6.06% dividend, beating anything you can get at your local bank.
When inflation increases, cash loses value. Generally, this means that traditional bonds also lose value, because the bonds’ future cash payments have also lost value. TIPS automatically adjust value to track inflation. So, if like me, you think the loose nut behind the wheel is causing the economy to fall into inflation, this could be an interesting (and profitable) investment. Hey - what have you got to lose at this point?
So - if you have followed the value guidelines I’ve laid out, you have little to fear, and should be shopping for more of what you already own.
If you have fresh cash to invest, there are plenty of opportunities, and now may be the time to start taking advantage of them.
Dollar-cost average into them, starting tomorrow - if you haven’t already.
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