The markets continue to be tumultuous and were seeing the markets re-test the lows that were reached in August. Since October 29th, the S&P 500 is down 8.5%, the Russell 2000 is down 10.7% and the emerging markets are down over 15%. Even energy stocks are getting hit hard. Should you be selling stocks, gritting your teeth and hanging on or be stepping up to the plate and buying?
To answer that question, you cant just look at the headlines or your account value and decide whether or not action should be taken. The market headlines are based on averages. Movements of the bigger companies in the averages can easily skew the performance. The financials have been getting hammered lately and financials make up a large part of the S&P 500.
Of course, that doesnt mean that other stocks are immune. Investors (and traders) can panic when they see the decline of the averages and they sell everything. And sell they have.
Buy, sell, hold? Your home questions answered - TODAY 101 ::
Hold. If you really want/need to buy or sell, chances are you will, whatever I recommend, so please feel free to ignore all my advice!
http://today.msnbc.msn.com/id/23376572/page/2/HOME |
The decision to buy, sell or hold shouldnt be based on the overall market. It shouldnt be based on fear or greed. I believe we need to look at individual holdings to determine which action we should take.
I dont know of anyone who has stopped using their telephone or internet based on the recent decline in the market. Youll continue to use it and youll continue to pay your phone bill month after month. Thats money the telephone companies can use to grow their businesses and to pay dividends. Rural telephone companies also receive subsidies from the U.S. Government. This represents a very stable cash flow.
To say that differently, a rural telephone companys ability to pay their dividend usually isnt affected by the economic cycle. Thats one reason I regularly use them in my clients portfolios.
Ratings — Buy/Sell/Hold::
Analysts categorize their ratings in different terms, but ultimately the ratings are broken down into Buy, Sell, and Hold.
http://www.hashemian.com/financial-markets/ratings-buy-sell-hold-212.htmHOME |
Buy, Sell or Hold? Analyst Fraud From Economic and Natural Law ::
Buy, Sell or Hold? Analyst Fraud From Economic and Natural Law Perspectives. Ronald J. Colombo, Hofstra University School of Law
http://works.bepress.com/ronald_colombo/1/HOME |
That hasnt prevented a sell-off of these rural telephone carriers of late. Those buying these stable companies now are handsomely rewarded by higher dividend yield (many now in the 6-10% range).
The underlying businesses of these companies havent changed. Their ability to pay and increase their dividends hasnt changed. So its hard to justify selling them now. Its quite easy to build the case for buying them.
Another group of securities that havent been fairing well lately is the closed-end bond funds. Typically, bond funds do well when the stock market is falling and interest rates are going down. Credit-related panic selling, though, has driven the price some quality shares down 8-10%. Will the credit crunch adversely affect these holdings?
I dont think it will. There are closed-end funds with attractive portfolios of bonds that can be purchased for less than the underlying costs of the bonds themselves. For instance, a sovereign government fund isnt going to be adversely affected by the sub-prime mortgage situation, yet these shares have been sold-off just like everything else. But they continue to pay their dividends and have yields over 6%.
With the 10-year U.S. Treasury now yielding less than 4%, these are very attractive yields. As market fears subside, investors looking for a higher level of income will once again recognize these securities and move money back into them. That should bring a recovery in their share prices. In the meantime, we continue to earn over double the 10-year Treasury note.
In short, if we just look at the headline numbers of the major stock market averages, its easy to come to the conclusion that we should get fearful, sell off stocks and move a large part of the portfolio to cash. When you dig below the headlines and do some research you see that there are high-quality, defensive companies that make sense to continue to hold and to buy more.
Ive just highlighted a few examples. The market downturn, in my opinion, has also created some attractive opportunities in growth-oriented companies. In particular, I like companies that are part of longer-term global trends. For instance, global growth and the need for alternative energy have spurred tremendous demand in several industries. Those stocks are now very attractive.
The key is to not run with the herd. When everyone is rushing for the exits, those brave enough to stay behind can pick up some real bargains. I believe that now is one of those times.
Pre-Article:Do I Need To Know What Is A GPS System?
Next-Article:Who Caused the Housing Bust
|
Buy, Sell, or Hold?