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big change in stock selecting from late february to today

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May 19, 2009 – Comments (4)

In late February / early March there was so shortage, even a radical abundance of stocks that would double your money if they simply survived.  No matter how damaged they became in surviving, via selling off assets, taking higher interest rates to restructure debts, closing plants or business segments and becoming less than they were, if they simply survived they would be 2x your money or much, much more.  Often much, much, much more. 

LVS, MGM, many BDCs and insurance companies, a plethora of REITs and many, many more.

Some companies that were never really in big trouble fell into this category too.  ASH, RCL, DOW, GE, and more. 

Today there aren't many "if it just survives its a 5 or 10 bagger" stocks left and the risk levels associated with those stocks is far higher than it was 2-3 months ago. 

So if we don't get a significant dip in the markets from here ... that means guys with some cash still on the sidelines, like Checklist, will have to shift our strategies from just caring if companies you invest in survive to caring about their future prospects. 

4 Comments – Post Your Own

#1) On May 19, 2009 at 10:03 AM, portefeuille (99.60) wrote:

 ... and almost no company has not survived so far.

(counting the seconds until someone comments mentioning Obama, the Fed, Goldman Sachs or any of the other "evil empires" ...)

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#2) On May 19, 2009 at 10:17 AM, SkepticalOx (99.45) wrote:

ETRADE (ETFC) is still one of them. The only reason why its trading < $2.00 is because people are pricing in the risk the company with be a gonner. It's brokerage business is probably worth 5x what the company is worth now, not to mention potentially being an acquisition target.

There are still some out there, except the risk-reward is less than what it was a couple months ago. 

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#3) On May 19, 2009 at 11:56 AM, checklist34 (99.71) wrote:

porte...  thats a really good point, and a lesson for the next time we get negativity and bearishness as severe as it was in early march.

MANY stocks of companies that aren't yet certain to survive are 2-3-4 times your money from the lows, or even 10 baggers.

All it takes is a change in sentiment and peoples willingness to take risk goes up wildly.  AHR, FCH, several other REITs, several BDCs, several insurance companies including GNW, PNX still potentially face material risks going forward, but are multi-baggers off their lows, sometimes 10 baggers.

I focused on finding companies that were highly unlikely to fail and which would at least double if they simply lived. 

In retrospect...  maybe i should have made a really broad play into the hyper-beat down tickers like those mentioned above.  Instead of, on march 6 when I decided to just go in, adding to my core names like ASH I should have takean a broad, spread out tiny position in 50 of these companies.

This bounce has truly seen "most beaten down, most rebounded" except BBi and a couple others. 

Is Etrade done as a company?  I've never even seen that ticker before.

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#4) On May 19, 2009 at 11:57 AM, rofgile (99.32) wrote:

checklist- that's exactly where I am at.  I've been putting money aside to invest, but I am still waiting for the right time before buying more.

What was once a simple choice is now more complex.   And, I am still expecting some sort of correction to occur now before the bull market goes higher - but I don't know when or for sure that this will happen.

Patience is the key - just keep a really big list of companies, figure out which ones have the least debt, best overall picture, and best value and wait till one of them reaches a value that you set far ahead of time for a buy-in price.  Discipline is important to not just put more money in. 

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