patrick.net

Saint Warren says forget the market, look at the valuation of individual stocks. There are bargains lurking in every kind of market.

That's certainly true - at the same time you can focus on undervalued companies in each sector and still get burned if those companies are just not interesting to the market.

Also true is that there is money to be made in falling markets (if you expect that this will happen).

I've been sitting on the sideline cautiously as we approach inauguration day along with the first few months of presidency.

The Mechanics of Finding an Undervalued Stock: https://investorjunkie.com/29489/find-undervalued-stock/

Finding undervalued stocks is art, not science. You want to locate possibilities by looking at the most common type of criteria. Then when you find it, that’s the signal to investigate more — but not necessarily to buy yet.

Look for one of the following indicators, and then be prepared to do deep research and dive into the company’s details.

Underperforming stocks. In every market sector there are always leaders and laggards. You want to always pay close attention to the laggards. That isn’t to say that a stock is undervalued just because it’s trailing others in it’s sector. But if the fundamentals and financials are healthy compared to it’s competitors, it might be because it’s time hasn’t come yet. You’ll want to get in before it does!

Price/earnings ratio (P/E). This is one of the first clues that a stock’s undervalued. If the typical P/E ratio in a sector is 20 and you find a stock trading at 10, you need to investigate. Again, if the fundamentals and financials are comparable to it’s competitors, but it’s not being blessed by one of the investment advisor superstars, it may be a strong candidate.

P/E growth ratio. You can determine this by dividing the P/E ratio by the company’s projected growth rate over the next five years. If the number is less than one, the company may be a strong candidate. Just be careful here: growth forecasts are expectations, not guarantees.

High dividend yield. If you find a company with a 4% dividend yield in a sector that typically pays 2%, you either have a company that’s about to go over a financial cliff, or one that’s a legitimate undervaluation. The higher dividend yield is either the result of a pending financial problem (that will lower the dividend yield) or it’s a case of a stock that’s paying an above average rate, simply because it’s currently out of favor.

High book-to-market value. A company with a book value of $1 billion and a market value of $100 million may not be a growth stock, but there’s a very good chance it could be a profitable takeover target. A competitor may look to buy the company to gain control of the assets at a bargain price. The stock price could explode in reaction to the offer, creating a nice windfall. Just make sure the market value isn’t low because one or more gigantic contingent liabilities.

Pay attention to market sell-offs. There are usually more undervalued stocks to be found after market sell-offs than at market peaks. Undervalued stocks are a relative rarity in strong bull markets, but can be quite common in bear markets. Bear markets punish good stocks along with the bad, and that creates plenty of interesting opportunities. Always keep some cash on hand, that way you can find these gems after big market sell-offs — when they’re much easier to find.

Be patient! Finding — and ultimately profiting from — undervalued stocks is a slow process. Take your time and be careful in locating legitimate investment opportunities. And when you do, be ready for them to be discovered by the rest of the market. It can take years but the returns can be spectacular.

BayArea says

High book-to-market value. A company with a book value of $1 billion and a market value of $100 million may not be a growth stock, but there’s a very good chance it could be a profitable takeover target. A competitor may look to buy the company to gain control of the assets at a bargain price. The stock price could explode in reaction to the offer, creating a nice windfall. Just make sure the market value isn’t low because one or more gigantic contingent liabilities.

Thanks, that's an aspect I had not considered.

Nothing wrong with cash either and wait patiently.

But I believe this year will be very good for stock market. It's simply because majority expect it to fail.

But when everyone gets complacent and starts believing all is great lots have another great year of 2018 I would worry and sell.

Copper, cement, steel should be good commodity investments this year, as much building will get done. Oil also should rise as the political situation changes.

I'm in precious metals and treasury bonds now

Stock market has been going too damn well for me since the election. Makes me worry, but also makes it really hard to sell for fear of missing out on more gains like that.

So I guess I'll just do nothing for now.

OK, my holdings are way the hell up yet again.

I don't want to sound ungrateful, but jeez, what is driving this rally? I don't get it.

"OK, my holdings are way the hell up yet again. I don't want to sound ungrateful, but jeez, what is driving this rally? I don't get it."

Really? It's pretty simple. Everyone knows the Trump Administration is going to give Big Business everything they've ever wanted. Eliminate business taxes. Eliminate regulation. What don't you get?

Might be a good time to go into business for myself.

What do you own Patrick

"Might be a good time to go into business for myself."

Maybe--but it's not necessarily good for small businesses. Just for large corporations.

errc says

What do you own Patrick

My top 5 by dollar value are:

LUV : Southwest Airlines, only airline that is consistently profitable; has done super-well for me and I love to fly them
CBOE : My option on options, lol
V : An inflation hedge, since they take a percent of purchases
VTSMX : Low-overhead index fund
SHOP : My speculative fun bet, has worked out well so far, but they don't have a profit

All in the green today.

joeyjojojunior says

"Might be a good time to go into business for myself."

Maybe--but it's not necessarily good for small businesses. Just for large corporations.

Not necessarily just for large corporations. We shall see what Trump actually does.

rando says

I don't want to sound ungrateful, but jeez, what is driving this rally? I don't get it.

I'm thinking the Fed in conjunction with the millennials hitting the home buying age.

The record high graphic above the marijuana graphic - mere coincidence?

I would give up but I believe that I can FIX STUPID.

http://www.cnbc.com/2017/02/12/trump-administration-is-complete-insanity--and-the-markets-are-in-a-fantasy-land-stockman.html

There are no coincidences

Freedom is fighting back against the War on Drugs, and we're winning. Should come as no surprise as Marijuana Prohibition and it's supporters is the definition of Failed Losers. Yup, we're looking at you, Usama bin Sessions

Yesterday was the markets biggest down day of the year.

My treasuries and gold had a nice pop.

BayArea says

Yesterday was the markets biggest down day of the year.

:(

But still feeling pretty good overall.

Patrick, what's your threshold for remaining bullish on the market.

i enjoyed a handsome run up, but like all things, it must come to an end at some point?

Most of my portfolio has transitioned to the anticipation of a correction.

How's GM treating you?

I think Sears is on the rebound.

the trend is down for precious metals and bonds.

gold and silver will have a HUGE crash before the end of Trump's first term.

just any guy says

I think Sears is on the rebound.

Sarcasm?

RealEstateIsBetterThanStocks says

the trend is down for precious metals and bonds

What? As the market has been running up since the election, bonds and precious metals have responded in inverse fashion.

But if the market starts correcting, that inverse relationship will hold.

BayArea says

But if the market starts correcting, that inverse relationship will hold.

you got the relationship right.

my prediction is the market and economy will continue to go up from here.

if i had gold, i would have dumped it all on Nov 9.

most gold holders still wait to see if GDP will improve under Trump. the first wave of mass sell off will commence when GPD news hit the papers for > 3%.

indigenous says

just any guy says

I think Sears is on the rebound.

Sarcasm?

Si :)

Retail is getting it's ass kicked. Malls are at the precipice.