Up/down, buy/sell, gloom/boom: It’s not easy to be a long-term investor

Take the long view

The stock market is fixated on the short-term, we all know that. It’s an unusual occasion when stock analysts and investors look more than a few quarters ahead. That means stock prices often tend to respond to short-term news as if it were the only news.

And that means investors with a long-term view of companies and economic trends can often buy likely long-term winners while they are temporarily depressed by short-term news. This kind of long-term thinking in a short-term market is one of the best ways I know of for the average investor to beat the stock market indexes.

In pursuing that kind of strategy, however, too much caution is actually a bad thing. Let me explain—and give you some examples of stocks and sectors where taking the long view will pay off. Read more

Stocks are overbought but the trend is still up

Markets always run to extremes both on the up and downside. And sometimes the extremes can be quite extreme.

Right now a number of technical indicators are saying that stocks are overbought. That means they’re headed for a correction.

Some time.

But stocks that are overbought can get still more overbought and now technical indicators are also saying that the upward trend in stock prices remains strong.

In other words while there’s a correction ahead it doesn’t look like it’s just around the corner. Read more

Natural gas pains: What’s a value investor to buy?

Some company will eventually make a killing from today’s collapse in natural gas prices.

But when? And which company?

Value investors usually only need to identify a bargain and then hang on until the rest of the stock market catches up with their thinking. But the plunge in natural gas prices has been so severe and could last so long that some of the companies with the best natural gas assets may not survive the shakeout.

Balance sheets are at this moment more important than geology.

Prices are the beginning of the problem. Benchmark Henry Hub natural gas for September delivery closed at $3.163 per million BTUs (British thermal units) on August 17,

That’s a 44% decline in price since the beginning of 2009 and the lowest price since September 2002.

And traders fear that this isn’t the end of the worst. Read more

Update ONEOK Partners (OKS)

Certainly not a great quarter but it will do.

After the close on August 4, ONEOK Partners (OKS) announced second quarter earnings of 81 cents a unit. (This is a master limited partnership rather than common stock.) That was down from $1.46 in the second quarter of 2008.

But with most of its capital spending budget about to go from a drag on cash flow to a contributor to revenue, I’m going to hold onto these units and up my target price a tad.  Read more

Look out for natural gas Monday

Last week it was oil companies reporting their earnings numbers.

Monday investors get a big dose of numbers from natural companies.

The earnings aren’t likely to be pretty although since many producers wrote down billions in assets last quarter–Chesapeake Energy (CHK), for example, wrote down $6 billion in assets–the numbers won’t stun investors this time around.

The big issue for natural gas stocks–and for the shares of coal producers who compete with them–is when companies will start cutting production so that supply can fall closer to demand. Read more