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weiwentg (98.34)

More money than ideas at this point

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December 09, 2009 – Comments (3)

At the height of the credit crisis, value investors probably had more ideas than money. Even if you thought that the big US banks were too hairy, you could have picked up blue chips in technology or consumer staples. You could have bought Berkshire Hathaway. You could have bought business services like Paychex or ADP. You could have bought convertibles or distressed debt (or a mutual fund which specialized in that sort of thing, like Third Ave Value or one of the Mutual Series funds). 

Right now, the market has been on a tear. I think there are select pockets of value. Blue chips generally are undervalued. Big Pharma is undervalued. There are a few other wide-moat stocks elsewhere. Some utilities are undervalued - I like Exelon and Westar.

However, Josh Peters, who runs two dividend-focused portfolios for Morningstar says that perhaps investors should consider holding cash, instead of buying. The market has run up quite a bit, and cash is always worth 100% of what you paid - ok, not always, but the situations in which cash isn't worth what you paid (money funds breaking the buck) aren't likely to recur. 

3 Comments – Post Your Own

#1) On December 09, 2009 at 11:24 PM, Nicholas07 (< 20) wrote:

I agree that investors have more ideas than money. Apparently because of the global crisis most of the capitals were seem to end into nothing and the only thing that left to them that will keep every business going is the brilliant ideas to stabilize financial market system. Perhaps we all aware of the unemployment problem happening across the world. Just recently there is one positive sign as employment is concern. Numbers on unemployment  for November have been released, and it turns out that unemployment actually went down last month, falling from 10.2 percent in October, but down to 10 percent in November. Optimism could help more than anything else, as confident consumers are more likely to spend money. People are also much more likely to get payday cash advances if they know their jobs are secure.

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#2) On December 10, 2009 at 2:13 AM, caterpillar10 wrote:

good cash flow & leadership (both senses: internal & in respective industry) have floated to the top of my checklist in current period.... 

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#3) On December 10, 2009 at 8:17 AM, dudemonkey (58.63) wrote:

I would question this Josh Peters' value investing philosophy.  If you are seeing truly undervalued stocks, you should buy them regardless of whether you think the market is going to go up or down.  One thing I've learned from CAPS is that the really good market timers are wrong as much as they're right.

I am seeing some decent values out there right now.  It's not like it was in March where you could just pick whatever you wanted and it was likely to be undervalued, but there is still value to be had.

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