Read their balance sheets to see why you’d rather own Lynas than Ford
Follow the money.
Great advice whether you’re trying to unravel political skullduggery or separate stock market winners from wannabees.
Too many investors, though, think that the money they should be following is earnings, the most familiar but also most easily manipulated of financial measures. The great financial crisis, which still has the world economy in its grip, should have taught us that companies can continue to generate fabulous earnings growth even as they rot from the inside.
No, if you want to follow the real money concentrate on balance sheets, the best single source of information about a company’s health.
Right now, as so many companies are still recovering from their near death experience in the land of debt and leverage, watching balance sheets for the moment when a company goes from intensive care to the recovery room is one of the best ways to look for bargain-priced stocks that are on the mend.
Let’s take Ford Motor (F) and then Australian mining company Lynas (LYSCY.pk) as examples of what following the balance sheet can tell you about a company and about whether or not—and when—you want to buy its shares. Read more
Buy on the dip? Even a tiny 3.3% dip? Maybe soon for some of the stocks I’ve called “too expensive”
You can tell a lot about the short-term direction of the market from how it responds to news.
A market that, in Wall Street parlance, wants to go up won’t pay any attention to bad news. It will rally anyway.
A market full of investors looking for an excuse to take profits won’t pay attention to good news. It will sell off anyway.
Today’s solid sell off—the Dow Jones Industrials finished down 203 or 2.1%–on what was a decidedly mixed bag of economic news is a sign that the market wants to correct at least a bit after its very solid September run and the longer rally that began in March. Volume was above average today so I think we should take this move seriously.
I can’t tell you how long any downturn will last. My belief is that there’s enough cash on the sidelines waiting to come in to make any correction short and shallow. But I don’t know how many money managers who loaded up on stocks to dress up their portfolio for the end of the quarter on September 30 did so with their fingers crossed and now want to unload equity-heavy positions that made them nervous even as they were buying them to avoid the potential wrath of clients.
Right now, this instant on October 1, the Dow Industrials are down a miniscule 3.3% from the close on September 22. That’s not enough of a dip to make me roll out the buy on the dip bandwagon.
But some stocks that I’ve been watching in these posts, looking for a decent entry price, have sold off more rapidly. And they’re now worth a look. Read more
