I wouldn't know a screaming deal if one smacked me in the face
Or: Confessions of a Dirty Bottom-Fisher
While ruminating on my previous blog about stocks not being attractively valued at the moment, a few important thoughts struck me.
1) The title of my previous blog implies that I know (and more importantly, act upon) the exact time when stocks are a screaming deal. Truth is, like many of you I fancy myself a bottom-fisher. I LOVE me some undervalued equities, especially ones with attractive technicals and dividend growth.
2) In CAPS and real-life, however, I mostly REJECTED the great opportunities presented in November and March. Did you?
3) What is "attractive" will vary depending on your size, experience, goals, style, etc. But wouldn't most investors during the last decade have KILLED to have access to prices and yields as they currently are? Am I missing out on great opportunities by staying mostly in cash (and similarly, with only 66 active picks)? I frequently worry that by being too picky I lose out on a lot.
Case in point:
On Nov 19-21 of last year, I watched in horror and read blog after blog and news item after news item trying to piece it all together. I made 0 CAPS picks during that "bottom", and 0 real-life trades.
On March 5th, 6th, and 9th of this year I got a bit more brave and definitely recognized that the market was oversold. I green-thumbed 7 or 8 things and very profitably gave some ultrashorts the red. This sounds like a sweet deal, but given the kinds of deals that were out there, I should have been green-thumbing A LOT MORE. If you want a real bottom-picker, just look at Ultralong. According to my IRA records, the only thing I bought with real money during march lows was a tiny stake in JNK, which has been yielding and appreciating handsomely (thanks go to EverydayInvestor for his JNK pitch).
The point is this: that if I had successfully bottom-fished say BP (thanks go to GMX for the BP tip) at $34, I'd have been sitting on a major oil company, that basically trades like the market but yields around 9.8% anually!! Imagine if I'd put $5000 (a majority of my fledgling IRA) into BP at $34 and just held and held. I don't imagine it would be regretted in 10 years.
How many BPs (yielding 10% mind you) could be in my CAPS and real-life portfolio right now? I don't want to know. But by asking the question, I'm hoping that I'll have the guts and foresight to act next time. There's always a shoulda, a woulda, or a coulda, but they're only annoying if we constantly use them and don't learn from them.
Happy deep value hunting.
BigFatBEAR (who is quite certain that there will be another bottom, that it'll last for around 3 days, and that he'll mostly miss it) :P