There are two primary reasons why anchoring your investing decisions to a market’s Fundamental...
8 Stocks from a Value Expert
09/11/2015 9:00 am EST
World markets have been keeping a watchful eye on China. It seems that when China sneezes, global markets catch a cold, observes value investor Charles Mizrahi, editor of Hidden Values Alert.
Some of the worries over China are the devaluation of the yuan, the plunge in the Shanghai Composite index, the sluggish Chinese economy, and declining commodity prices.
When investing in the stock market, emotions are the enemy. If you get emotional every time the stock market rises or falls, then investing is really not for you. Better off sticking your money in a Treasury bill.
Keep this in mind...we've been here before. Stock markets, by their very nature, have periods of rising prices and periods of falling prices.
The trick is to use market fluctuations to your advantage, such as buying when prices are low and selling when prices are high. Over the long-term, it's the fundamentals of the business that dictate the stock price...not the other way around.
During a market decline, you should be looking to add to your positions or initiate new ones...not sell.
If you feel like selling during a market panic, ask yourself: Am I selling because stock prices are down or has there been a change in the valuation of the business I'm investing in?
If you're focusing on what the company is going to do, then you're investing. If you’re focusing on the stock price, then you are a speculator.
If you're an investor, market downturns are opportunities to buy—that's when valuations become cheap—not sell.
So, what should you do during market sell-offs?
First, hold back on your emotions. Emotional decisions are usually terrible ones.
Second, think long-term. Over the long-term, if you buy financially sound companies when they are trading at bargain prices, you should see an increase in your net worth.
Third, look at some of our most recent recommendations. If they are trading at a lower price than the price we added them to the portfolio, they should be the ones you consider for purchase.
If you are new to Hidden Values Alert or underinvested, we recommend you build your portfolio with stocks that have a P/E no greater than 12 and currently trading at or below their original purchase price.
The following stocks pass both rules:
Mosaic Co. (MOS)—current p/e of 11
Chevron (CVX)—current p/e of 11
Sanderson Farms (SAFM)—current p/e of 5
Micron Technology (MU)—current p/e of 5
MRC Global (MRC)—current p/e of 9
Joy Global (JOY)—current p/e of 9
American Railcar (ARII)—current p/e of 7
Copa Holdings (CPA)—current p/e of 7
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