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One of the best examples why 'Buy when there is blood in the streets' makes sense...

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July 01, 2011 – Comments (14) | RELATED TICKERS: TRW , TEN , MTOR

Here is what I wrote about 3 auto-industry related stocks back in July of 2009 in my post 'I Don't Know Why Bears' (in which I also tried to make a point that a new bull market has already started):

"...

However, when it comes to bull markets: I know one when I see one.

It is just plain crazy to me that some people just don’t see it this time.

They talk about how “fundamentals did not improve so this can’t be a bull market”, or how “this is just a correction in a bear market”, or how “blah, blah, blah”…

I mean, I just don’t get it.

First of all: YOU DON’T ARGUE WITH THE MARKET! (I mean, you can, but you won’t make any money).

If market is telling you “Everything is fine, or is on the mend”, you better believe it (even if you “know” it ain’t so).

Take for example some of the stocks connected with the auto industry. Everybody knows auto industry is in the worst shape ever.  

Tell 95% of the Americans about buying a stock of TRW Automotive, Tenneco, or Arvin Meritor and they will tell you: you are insane. With these companies being suppliers to auto industry, people wouldn’t thouch them even if you gave them these stocks for free.

However, from their March lows, TRW is up a 1,000%, TEN is up 1,500%, and ARM is up 1,300%..."

 

So that was back in July of 2009, but let's see what are the returns of these 3 stocks today, comparing to March 1st of 2009:

As you can see, TRW's return is roughly 5,000%, while TEN and MTOR (ARM was Meritor's old ticker) are up around 3,500%.

In other words, if you invested only a $1,000 in each of these 3 stocks (as you don't want to gamble too much, right?), today your investment in TRW would be worth $50,000 and your investment in TEN and ARM (now MTOR) would be worth $35,000 each.

$50,000 + $35,000 + $35,000 = $120,000

$117,000 gain in 2.5 years, on an investment of only $3,000.   Not bad, don't you think?

In my opinion, this is one of the best examples of the old adage "Buy when there is blood in the streets" and/or "Be greedy when others are fearful."

Wasn't there nothing but blood flowing in the streets of Detroit and Michigan at the beginning of 2009? I'm sure you remember, that wasn't so long ago. (Btw., I live in Michigan and work for a company that supplies parts to auto industry, so I guess I should know).

Well, either way, I hope both you and I have learned something from this.

Stay smart my fellow Fools (I know it ain't always easy) and Good Luck to you all

Have a great 4th of July, and don't forget to have fun when investing!

It's only money, remember?  :)   

14 Comments – Post Your Own

#1) On July 01, 2011 at 3:55 PM, dragonLZ (99.60) wrote:

Btw., if you invested $1,000 in each of the above mentioned stocks at the time I wrote my "I don't know..." post (on 7/27/2009), here is how your return would look like today:

Not too bad either, right?

 

Or if you bought some TEN and ARM when I issued my Strong Buy recommendation on these two stocks in October of 2009 (Issuing A Strong Buy Rating on TEN and Issuing Strong Buy Rating on ARM), your returns would be +235% and +113% respectively (S&P500's return 27%).

Please don't forget this was less than 2 years ago.

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#2) On July 01, 2011 at 4:35 PM, Momentum21 (95.11) wrote:

Pretty amazing indeed...I take it you had a piece of that? : ) I couldn't get my head wrapped around it but I am learning...maybe.  

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#3) On July 01, 2011 at 4:52 PM, lemoneater (81.91) wrote:

Have a happy July 4th, Dragon!

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#4) On July 01, 2011 at 6:58 PM, anchak (99.83) wrote:

The Uber Bull sayesth again - all the best Dragon!

 

and a Happy 4th.....

 

I have no idea how you picked those stocks - awesome job as usual!

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#5) On July 01, 2011 at 7:12 PM, EnigmaDude (92.91) wrote:

Hey dragon - what do you think about Eastman Kodak (EK) right now?  You have the top bull pitch back when the stock was trading for nearly $7 and now its down to almost $3.  I see it as a blood in the streets opportunity.  Do you?

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#6) On July 01, 2011 at 8:19 PM, EvilEmpire (29.48) wrote:

Most under-rated player ever.

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#7) On July 02, 2011 at 6:42 AM, FreeMarkets (89.61) wrote:

Without the auto bailouts most of those company's would be bankrupt.  If you got in just after the 2nd round of auto bailouts, then I commend you.  If you got in before the 2nd round and thought "they're is blood in the streets" you got lucky.

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#8) On July 06, 2011 at 2:08 PM, dragonLZ (99.60) wrote:

First of all, thank you all very much. I hope you had a great 4th of July holiday.

Secondly, I apologize for not responding sooner (maybe none of you are following this any more). Sorry about that.

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#9) On July 06, 2011 at 2:31 PM, dragonLZ (99.60) wrote:

Momentum21, I only had a small piece of it. That's why I said 'hopefully both you and I have learned something from this'. I guess we just have to wait for the next opportunity. :)

lemoneater, thanks again. I hope you and your family had a great time.

anchak, thank you very much. Very nice of you to say that. I appreciate it.

EnigmaDude, I don't see EK as a blood in the streets opportunity. Blood in the streets for me is when the market as a whole is in the dumps or at least one whole industry. Neither one is the case right now for EK.

As you know, I did like EK quite a lot at one point, but not right now. As I said in a comment to my pitch, EK's chart turned from a pretty one into a very ugly one. At this time, I'm watching it closely, but not ready to get back in any time soon.

From my experience, a stock like EK, if it survives, it might be a good turnaround story during the next bull market (with much smaller chance being that in this one).

However, keep in mind these are just my opinions. As my friend TSIF says: If I knew anything, would I be posting here?

EvilEmpire, I really hope your comment was about me. I'm not sure, but if it was, that might be one of the best compliments I got on this site. Thank you very, very much (Normally, I would thank you 10 more times, but I'm still not sure that comment was about me). 

FreeMarkets, I did mention word 'gamble' in my post above, right? Also, isn't

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#10) On July 06, 2011 at 2:44 PM, ag77840 (23.04) wrote:

What do you think about Bank of America right now? 

 

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#11) On July 06, 2011 at 11:52 PM, dragonLZ (99.60) wrote:

 sah713, per my calculations, BAC should start going up any day now. We'll see...

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#12) On July 07, 2011 at 1:26 AM, CCharing (89.52) wrote:

Hmm is there anything you like right now dragon?

 You're blogs are very interesting.

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#13) On July 07, 2011 at 2:19 PM, dragonLZ (99.60) wrote:

 CCharing, my newest buys are:

WRES (just got into it two days ago - I think oil and gas stocks are coming back strong)

MCZ (even after today's 10% jump in MCZ's price, I'm still down a little bit on this one)

MGIC (got in at $5 2-3 weeks ago. Enigmadude likes this one too.)

MAG (added to previously established position)

BRD (very small position since yesterday)

(for what is worth, CNO is still my largest position).

 

Good Luck!

 

 

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#14) On July 11, 2011 at 8:55 AM, ag77840 (23.04) wrote:

It looks like WRES is exhibiting a nice elliot wave pattern. I may have to look at the fundamentals.

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