Some thoughts on investing in the market

[nero3]

So far out of the 2009 low some stocks have emerged as winners.

I can mention a few:

Chipotle Mexican Grill, Baidu and Apple.

To find a similar move in any stocks I would go back to 1995 and look at tech stocks. It's very impressive.The big surprise would come if companies such as Dell, Microsoft, Intel, even companies such as Pfizer and Astrazeneca started to move out of the boring trends since year 2000. It's given that this needs a strong dollar. If that happens I think this is a secular bull-market coming that could last for 5 years or more. I think there is a slight chance the dollar could start getting really strong now, with the long bond making a move towards lower rates, like what happened after a spike in late 1994. I think the market is split between this scenario and a other scenario where inflation really heats up, and yields on the 10 year goes towards 6-7 %, the Growth stocks could do well in this scenario, but I have my doubt if the more boring stocks mentioned here would benefit or move out of their trends.

[flintlock]

Re: Some thoughts on investing in the market

Microsoft hasn't done too badly since September when I bought some. Up about 16% since then. My wife was all big on Apple in 2008 but I was nervous so we only bought a little. She reminds me of this every time talk of investments come up. Tech stocks scare me. Heck, stocks scare me.

[nero3]

Re: Some thoughts on investing in the market

Microsoft hasn't done too badly since September when I bought some. Up about 16% since then. My wife was all big on Apple in 2008 but I was nervous so we only bought a little. She reminds me of this every time talk of investments come up. Tech stocks scare me. Heck, stocks scare me.

Many tech companies have a lot of cash, and very little debt. I think in a sense it's similar to how some fast growing companies emerged out of the nifty 50 group in the seventies, only to make it good after inflation peaked in the 1980's. The valuations for companies like Dell is cheap I think, if you look at the levels of cash, relative to the price of the company. I think Dell have an advantage over companies like HP in that they have better taste. It's only Sony and Dell in the PC camp that can deal with Apple. I think the reason so many have avoided the Apple stock is old perceptions from the time Apple battled Microsoft in the 1990's. The young customers of Apple in emerging (where apple is the number 1 electronics brand) and developed markets don't even know about it. I think it's possible that Apple could try a takeover of Sony. It's also possible Microsoft make a move towards one of the hardware companies.

[karim0028]

Re: Some thoughts on investing in the market

You guys might wanna check out junior miners as well... They have been doing really well lately, alot breaking out of down trends and looking very bullish.... Most likely a correction and consolidation along with gold/silver, but very nice to keep in mind and track for trades...

CDE, UXG, NG, MNEAF, RBY.....

[nero3]

Re: Some thoughts on investing in the market

Thanks for the suggestion, however I don't really think these are good investments, I see it them more as a hedge. I would rather have the jewelery retailers that could benefit from a price drop in the precious metals. We are supposed to be in the middle of a mining boom, but those mining companies hardly makes a buck. I think buying some of the jewelery retailers now would be like buying Ford back in 2008.

[jpatter666]

Re: Some thoughts on investing in the market

Thanks for the suggestion, however I don't really think these are good investments, I see it them more as a hedge. I would rather have the jewelery retailers that could benefit from a price drop in the precious metals. We are supposed to be in the middle of a mining boom, but those mining companies hardly makes a buck. I think buying some of the jewelery retailers now would be like buying Ford back in 2008.

Mining companies hardly make a buck, but the companies that sell them the tools make out very well. Same principle applies in the oil industry IMO.

I've been buying on that idea.

I *do* own some gold miners, but view them as a long-term call on gold.

[nero3]

Re: Some thoughts on investing in the market

Mining companies hardly make a buck, but the companies that sell them the tools make out very well. Same principle applies in the oil industry IMO.

I've been buying on that idea.

I *do* own some gold miners, but view them as a long-term call on gold.

What worries me about these companies is that you have to time your move out of them. It's not a "forever" stock.

[jpatter666]

Re: Some thoughts on investing in the market

What worries me about these companies is that you have to time your move out of them. It's not a "forever" stock.

I don't think there are "forever" stocks anymore. Even the bluest of the blue chips I expect to have serious moves in volatility.

[karim0028]

Re: Some thoughts on investing in the market

yeah, no forever stocks... Trade the hell out of them, they have some awesome moves....

[flintlock]

Re: Some thoughts on investing in the market

I don't think there are "forever" stocks anymore. Even the bluest of the blue chips I expect to have serious moves in volatility.

Thats how I look at it also. Things have changed in investing.

[nero3]

Re: Some thoughts on investing in the market

Thats how I look at it also. Things have changed in investing.

I don't think it's true
http://finance.yahoo.com/echarts?s=F...urce=undefined

It's performed better now with ford than coming into the 1982 bull-market. Automakers in general have been a very strong sector. Could you have made the same statement back in 1983?

Look at these stocks. It's like 1983. It's hard to see it, but back then it was all about the recovery that would not start. Reagen had lost mid elections similar to Clinton and Obama. It was not as great as some people like to remember.

Everything is of course different, back then the natural resources employment were in a bad trend, now it's been in a good trend like in the late seventies coming, yet it's emerging something out of this. I think a lot have to do with the damage caused by the lehman collapse, I think that's an event much more extreme and rare than what is the normal view, that might have caused a general unwillingness to join into the market. I think the moves in many of these stocks mirrors the past. If anything it looks like a very tame version of the 1980's in line with Bill Gross new normal. It's certainly concerning with the declining emerging market's volume. It's an increasingly low volume in the US market's as well, the volume generally comes with the declines, yet it's much worse in the emerging markets.

The 1982 recovery had an increasing volume, not a declining volume as it have been this time. However, I suspect this post lehman climate is hard to compare to the past. It's much more likely that there already had been a booming world economy now, even a bubble if it had not been for Lehman.

It's very interesting with the moves in Ford, because that's definitively a strong dollar, non anti-oil type stock. It's interesting for a leading sector, if this were to be a resumption of a secular bear-market. I suspect this is a secular bull-market, but with a post lehman twist.

I suspect stocks like pfizer is in the early start of a very big bull-market.
http://finance.yahoo.com/echarts?s=P...l=PFE;range=my

[jpetr48]

Re: Some thoughts on investing in the market

Nero
great post and provocative thoughts, thank you.
Yes I agree comparing with 1982 is not normal. We all have a different baseline in how we look at markets. I recall when the dow was making its big recovery after March 2009, the talking heads on CNBC were scratching their heads wondering how the market mysteriously crept up consistently the last hour of trading so many consecutive days. Guess what? My one minute point and figure chart looks like the stair way to heaven from end of November to now - a one minute chart! Gee I wonder where all that liquidity came from??

I dont know about you guys but I can get caught up in the vortex of too much information and trying to overanalyze. I respect the thinking of those that can look upstream from precious metal falling and upstream energy plays. One lesson learned is the simpler usually the better. We have a good start with EJ's introductions into MLPs and multifamily apartment buildings. In one line my thesis is strong dividend income plays with sustainable (>6 months) growth fundamentals.

Staying open to new approaches.

[nero3]

Re: Some thoughts on investing in the market

Nero
great post and provocative thoughts, thank you.
Yes I agree comparing with 1982 is not normal. We all have a different baseline in how we look at markets. I recall when the dow was making its big recovery after March 2009, the talking heads on CNBC were scratching their heads wondering how the market mysteriously crept up consistently the last hour of trading so many consecutive days. Guess what? My one minute point and figure chart looks like the stair way to heaven from end of November to now - a one minute chart! Gee I wonder where all that liquidity came from??

I dont know about you guys but I can get caught up in the vortex of too much information and trying to overanalyze. I respect the thinking of those that can look upstream from precious metal falling and upstream energy plays. One lesson learned is the simpler usually the better. We have a good start with EJ's introductions into MLPs and multifamily apartment buildings. In one line my thesis is strong dividend income plays with sustainable (>6 months) growth fundamentals.

Staying open to new approaches.

If low cost long term financing is available I think it's good as future rental incomes probably will make the fixed charges look small as time goes by, but I really prefer stocks with passive ownership where others can do the work. Even if there is a good trend working it's still work with real estate. I think there is a certain degree of enthusiasm and energy, the sort of person that drinks 10 cups of coffee a day, organized and full of energy, that's an advantage when dealing with active real estate investing, or any kind of business that's not needed in the stock market, where it is more of a disadvantage to have that degree of enthusiasm, it's more important with a more cold analytic personality I think. I really think stock investing, real estate investing and building a good business in some sense needs different skills.

I agree on the information part. I think it's important to try to avoid predicting the market, or making a macro case to much. It's of course nice to look at the broad ways to look at valuation, however, by looking at the different numbers and going for what's cheap based on the numbers seems more prudent. Ford is still cheap. It's still Ford, still unpopular. It might be something with made in the US that's making a comeback. Ford certainly have potential if you think of the alternative energy and made in the US concept at the same time. I think it's possible that the next generation of cars due to subsidies will be made locally.

Another reason for Ford. I think crude inventories in October 2010 hit their highest levels since February 1982. It's just so clear that so much of this commodity hype is pure speculation. I wonder how long it can last. One thing that is a reason to worry is the capital controls they are embarking on in emerging market's like Brazil. It sounds so heroic, to protect the real from getting strong, but I think this will be working against those who want their money out of Brazil. Similar things are going on in Mexico with their 100 year bonds, and other emerging economies where they take advantage of the bond bull-market for emerging market bonds, to move foreign debt into their own currency. So much of this emerging market demand for fuel comes from fuel subsidies, in countries with what seems like unsustainable budget's in anything but a speculative weak dollar environment. It have already went to devaluations in countries such as Venezuela, but I guess there are more to come.

[jpetr48]

Re: Some thoughts on investing in the market

Nice reasoning on valuation and performing above expectations. I am reading Jeremy Siegel work and like this approach better than going with book value or future cash flow.

I am not sure F is a great example for this.
Over past 3 months strong buys and buys have increased from 9 to 11. Second, thompson one dbase shows 3
earnings estimate revisions up and 1 down.

Here are 3 examples of industries/companies with EPS surprises over past two quarters: foreign mobile telecom (e.g. cel), MLP (TLP) and passive involvement with energy property ( NSH). Your example of CSCO is good after Chambers took a beating last month. My only concern is CSCO is part of technology and expectations are already high for technology as they are leaders in 2011 so far.