Changing it up a bit, I wanted to write a little about the math of falling stocks. To many investors, if a stock is down 30% or 50% or whatever, it’s considered cheap. After all, if a stock is off a huge 50%, how much further can it fall? That is where the math comes in. Ask most people how many 20% drops are in a 50% decline, and the answer is two and a half. Right? 50 divided by 20 equals 2.5. Simple … but also wrong. In actuality, for a stock to fall 50%, it has to...
Now for this week’s Contrary Opinion Button. You can view all the buttons by clicking here. The Darkest Hour Has Only Sixty Minutes By Morris Mandel, an American Jewish educator, this button reminds us that troubles pass. As an investor, trouble for you may be a big bear market or a tiny news items that causes your stock to crater. Your job is to look beyond the trouble, remember that good times lie ahead, and take the actions to position yourself to benefit from them.
In this week’s Stock Market Video, Cabot China & Emerging Markets Report Editor Paul Goodwin says it’s good to have some good news after what seems like an extremely long period of counseling people to be patient. The major indexes look much better, which has given Cabot’s market timing indicators a buy signal. It’s time to put some money to work, but don’t jump in with both feet, instead, let the market pull you in. Stocks discussed: Express (EXPR), SanDisk (SNDK), Select Comfort (SCSS) and Sally Beauty (SBH). Click below to watch the video!
If you ask some professionals why it’s difficult to consistently make money in the market, you’ll get a variety of answers, ranging from complexity to emotions to the relatively recent advent of high frequency trading, which can push stocks around in the blink of an eye. But I think one of the biggest reasons it’s tough to make (and keep!) money in stocks is because the market itself teaches bad behavior. The best explanation of this comes from William Eckhardt, who was interviewed two decades ago in the book New Market Wizards (written by Jack Schwager and available at...
As for the current market environment, it’s still not quite there yet. Of course, the major indexes have bounced nicely, but most of the action has been in the off-the-bottom crowd … the stocks that fell 40% to 50% during the past three to six months like the financials, the transports, the oils, the commodities, the industrials and the semiconductors. Please don’t get me wrong–there is nothing wrong with the rally’s strength initially being led by these off-the bottom stocks and sectors. But, in my experience, these names almost always slow down as all the unhappy shareholders who own...
