Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
Dow Stock Market Short-term Trend Analysis - 15th Oct 19
The Many Aligning Signals in Gold - 15th Oct 19
Market Action Suggests Downside in Precious Metals - 15th Oct 19
US Major Stock Market Indexes Retest Critical Price Channel Resistance - 15th Oct 19
“Baghad Jerome” Powell Denies the Fed Is Using Financial Crisis Tools - 15th Oct 19
British Pound GBP Trend Analysis - 14th Oct 19
A Guide to Financing Your Next Car - 14th Oct 19
America's Ruling Class - Underestimating Them & Overestimating Us - 14th Oct 19
Stock Market Range Bound - 14th Oct 19
Gold, Silver Bonds - Inflation in the Offing? - 14th Oct 19
East-West Trade War: Never Take a Knife to a Gunfight - 14th Oct 19
Consider Precious Metals for Insurance First, Profit Second... - 14th Oct 19
Stock Market Dow Elliott Wave Analysis Forecast - 13th Oct 19
The Most Successful IPOs Have This One Thing in Common - 13th Oct 19
Precious Metals & Stock Market VIX Are Set To Launch Dramatically Higher - 13th Oct 19
Discovery Sport EGR Valve Gasket Problems - Land Rover Dealer Fix - 13th Oct 19
Stock Market US Presidential Cycle - Video - 12th Oct 19
Social Security Is Screwing Millennials - 12th Oct 19
Gold Gifts Traders With Another Rotation Below $1500 - 12th Oct 19
US Dollar Index Trend Analysis - 11th Oct 19
China Golden Week Sales Exceed Expectations - 11th Oct 19
Stock Market Short-term Consolidation Does Not change Secular Bullish Trend - 11th Oct 19
The Allure of Upswings in Silver Mining Stocks - 11th Oct 19
US Housing Market 2018-2019 and 2006-2007: Similarities & Differences - 11th Oct 19
Now Is the Time to Load Up on 5G Stocks - 11th Oct 19
Why the Law Can’t Protect Your Money - 11th Oct 19
Will Miami be the First U.S. Real Estate Bubble to Burst? - 11th Oct 19
How Online Casinos Maximise Profits - 11th Oct 19
3 Tips for Picking Junior Gold Stocks - 10th Oct 19
How Does Inflation Affect Exchange Rates? - 10th Oct 19
This Is the Best Time to Load Up on These 3 Value Stocks - 10th Oct 19
What Makes this Gold Market Rally Different From All Others - 10th Oct 19
Stock Market US Presidential Cycle - 9th Oct 19
The IPO Market Is Nowhere Near a Bubble - 9th Oct 19
US Stock Markets Trade Sideways – Waiting on News/Guidance  - 9th Oct 19
Amazon Selling Fake Hard Drives - 4tb WD Blue - How to Check Your Drive is Genuine  - 9th Oct 19
Whatever Happened to Philippines Debt Slavery?  - 9th Oct 19
Gold in the Negative Real Interest Rates Environment - 9th Oct 19
The Later United States Empire - 9th Oct 19
Gold It’s All About Real Interest Rates Not the US Dollar - 8th Oct 19
A Trump Impeachment Would Cause The Stock Market To Rally - 8th Oct 19
The Benefits of Applying for Online Loans - 8th Oct 19
Is There Life Left In Cannabis - 8th Oct 19
Yield Curve Inversion Current State - 7th Oct 19

Market Oracle FREE Newsletter

Stock Market Trend Forecast Oct - Dec 2019 by Nadeem Walayat

Secrets to Succeeding at Stocks Bear Market Investing

Stock-Markets / Learning to Invest Jul 03, 2008 - 02:21 PM GMT

By: Keith_Fitz-Gerald

Stock-Markets

Best Financial Markets Analysis ArticleThe Dow Jones Industrial Average is already in the bear's grasp. And the U.S. economy may well be headed for a recession. But here's the ultimate irony: Bear-market investing offers a direct pathway to the biggest profit opportunities most investors will ever see.

History shows time and again that the worst returns come to those who buy at - or even near - market peaks, like those of 1928, 1969, 1999 and 2007, when Price/Earnings (P/E) ratios are typically higher than “normal.”


Conversely, investors who buy when the days are darkest reap the best returns: Think 1932, 1942, 1982, 2003 and - take a deep breath - possibly 2008.

Clearly, at a point when the world looks like it's going to hell in a hand basket , sitting on the sidelines in cash would appear to be the easiest and safest strategy to adopt. But there's one major problem with that kind bear-market investing strategy.

That “safety” is an illusion. And the strategy doesn't work.

Here's why.

Spectators Are a Bear Market's Biggest Losers

You see, you can't score if you don't play. And if your bear-market investing strategy is to sit on the sidelines during volatile stretches, the odds are good that you'll end up as a mere spectator when stock prices rebound, meaning you'll miss out on the big updraft that generates the long-term profits we seek.

The so-called “smart money” understands that many investors panic and race for the exits during bear markets. The shrewdest investors already are positioning themselves for the next round of stock-market profits - even though those profits may not appear for some time.

That's why it's best to stick with a long-term, battle-proven strategy - like the one that we advocate here at Money Morning, as well as within the pages of our premium monthly newsletter, The Money Map Report . This approach to bear-market investing enables you to stay invested alongside the smart-money crowd. That's really not a surprise, given that they're concentrating on the same investments that we're outlining for you - including companies that focus on such key global plays as energy, natural resources and worldwide infrastructure.

Not only are many of these “Global Titans” increasing earnings despite miserable market conditions, they're actually building market share and focusing on powerful trends that will take decades to play out and that will generate trillions of dollars in profits along the way.

After all, the global markets truly reward the companies that make the world “go ‘round'.”

The Five Keys to Bear Market Profits

Now that we're in the midst of a new bear market , here are the five secrets that will pave the way to bear-market profits:

  1. Don't Try to Catch a Falling Knife: The first bad news is never the last, as so many investors found out when the Internet bubble imploded in 2000, quickly eradicating $14 trillion of wealth. If the fundamentals don't match up with the stock's price, don't buy.
  2. Don't Overpay: One of the biggest miscues bear-market investors make is in concluding that certain stocks are a bargain simply because they've traded down to historic lows. It's better to consider “tangible book value.” The reason: Tangible book value represents what a shareholder can actually expect to receive if a company turns turtle; it's a good measure of what the firm's real assets are worth. So, at a time when earnings are decelerating - or have vanished completely - buying companies that are trading below tangible book value can provide an extra measure of downside protection, especially when you're talking about a company that's perfectly positioned to capitalize on powerful global trends.
  3. Look For Pricing Power: When the going gets tough, the tough… stop buying. At least, they stop buying the stuff they want, and shift, instead, to the stuff they need. This has a major ripple effect in the economy.  Many businesses are forced to go on the offensive to keep the customers they have, or to “win” new ones - at a time when consumers are loathe to spend. This suggests that companies that are able to continue, or even ramp up, their advertising spending make the best bets. Especially alluring are companies that can keep their customers - and even raise prices - in the face of a bull market.
  4. Watch for the “New Research Coverage Initiated” Signal: Although Wall Street hates to admit it, analyst ratings and recommendations aren't intended for us individual investors. At least, that's been the case historically. Investment banks actually use their company “coverage” to generate investment-banking deals and to cozy up to the senior executives of the firms that are being “analyzed.” Since analysts often have access to insiders long before they publish their “reports,” new coverage can signal positive future growth or expansion plans.
  5. Drill for Dividends: Many investors focus on so-called “growth stocks” in their rush for riches, when study after study demonstrates that dividend-yielding stocks can offer as much as a 25-1 advantage. One study by Ned Davis Research is particularly telling, noting that dividend-paying stocks provided returns of more than 10% a year from 1972 to 2005. Non-dividend paying stocks, in contrast, posted gains of just 4.1%. Given that this research study started at the worst possible time in the past 40 years - just prior to the “bear market” of 1973-1974 , which dragged on for 21 months and caused shares to lose 48.2% of their value - these numbers are especially noteworthy.

Follow this playbook, and you won't have to remain a spectator during lousy markets. You'll be out on the playing field - and you'll beat the bear.

News and Related Story Links:

By Keith Fitz-Gerald
Investment Director

Money Morning/The Money Map Report

©2008 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Keith Fitz-Gerald Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules