If you’re freaking out about now with the market taking a plunge today, while nervously anticipating what the market is going to do next with the jobs reports about to be released, I have two words for you — calm down.
Try this experiment:
Close your eyes and breath easily.
Now pretend the year is 2012.
Now imagine that the market has been in full bull-run mode for months.
You can’t catch a break to get in on a dip — and fear that you’ll end up buying at a peak and your stock will suddenly plunge has only led to being left on the sidelines as names you’ve been dying to own have kept going up-up-up in value.
Man, if only the market would pull-back and give you a buying opportunity.
If only you had a chance to start loading up on some names at good prices.
You’ve got a couple of annoying good friends who boast about the stocks they bought way back in the uncertain market in 2010 for dirt cheap prices that have since doubled, if not tripled, in value.
And you think “Oh man, if only I knew then what I know now.”
Okay, open your eyes.
Today is your future.
But before you mis-read my message to mean you should take your life-savings and randomly toss it all into the market — STOP!
I’m not saying that at all.
What I am saying is that there is quite possibly a good chance to buy some names in these full-market pullbacks for companies that are going to weather the storm and be standing strong whenever the market does start to have that steady bull-run once again.
Although I refuse to ever tell anyone what names I think they should be buying, as I’m a firm believer that everyone must do their own due diligence and not only pick a name to buy — but insure they buy it on the correct day for the right price — I realize there are a group of you who are absolutely paralyzed on the sidelines and the wet finger you’re sticking in the air looking for direction is just leaving you doing 360s in the wind.
So here’s about as far as I’m willing to go to at least give you a starting point with some names you might want to start rolling up your sleeves and deciding if you’d like to own any of these names. If so — choose for yourself what price level it is worth buying at. That could mean that right now is the perfect buying opportunity; it could mean that you think the stock had a little more room to drop and you’re willing to sit back and wait for that drop to occur — or it could mean that it’s already treading higher, and you need to set a limit price on what’s the most you’re willing to pay for it.
Sometimes — actually, more often than not — I’ll begin with a list of names I want to do research on — and end up not wanting to buy any of them — but the research might lead me to a competitor or a different supplier for one of the names that I have more of an interest in owning.
That’s the beauty of doing your own homework.
Before you buy a single share, you know precisely why you are buying a company, and you know what price you want it at.
Never-ever-ever buy a single share of a company just because you heard someone else is planning to buy it — or owns it.
You need to know precisely what it is about the company that makes them want to buy it, whether they’re buying it with options expecting to make a gain when the stock actually plummets in price, and what price they are buying it at.
And there’s a darn good chance they’re not going to call you first to tell you when they sell it, either, which could lead you holding the short end of the stick.
So let me get down to it. I still like my longtime names on my list, such as McDonald’s and Walmart.
Were you paying attention back in August when I told you that I viewed pullbacks in McDonald’s as a great buying opportunity?
If so, then you had the opportunity just a few weeks later to snatch some up at $54 — and just over four months later, you would now be looking at a $10 profit per share.
I still like the name — but with the company having been on a somewhat steady climb lately — I wouldn’t necessarily be looking to add to a position right now.
How about Walmart? Did you pay attention to my column last June when I said it was a long name on my due diligence? Did you roll up your sleeves and find a reason to like the name as well, and then jump on the opportunity to scoop some up a few weeks later with a little pullback around $47?
If so — good for you — as you just had an opportunity to take a little profit on this name that’s been treading around the $55 mark since last November. That’s a nice little $8 a share profit you just made.
And last April I told you I had added Wells Fargo, which was then trading around $15 to my due diligence list. If you did your own homework, liked it as well, and bought some shares — congratulations — you’ve just about doubled your money on that name in less than a year, as it is currently trading around $27.
By listing these examples, that doesn’t mean that I believe I’m some golden child and whatever names I choose go straight up and keep on climbing.
Of course not.
These names have pullbacks, as well.
The only difference is you must learn to recognize when a stock is having a pullback based on the overall market — and not because that individual company’s fundamentals have changed.
If a name you like has a pullback not related to its fundamentals — consider jumping at the chance to buy some more.
If the actual company is getting beaten up — then take emotion out of it — don’t fret over having made a bad decision to buy a company — it’s just business — so get out of it as quickly as you can and put your money to work in a better name.
For so long I’ve just listed the longstay names on my due diligence list — so it’s only fair that I now give you some new names that I’m looking at. These names include Hershey, Proctor & Gamble, CVS, Campbell’s, Unilever and Allergan.
Now don’t rush out and buy any of these names just because I have it on my DD list to do homework on.
How about rolling up your sleeves and doing your own homework — and see where it leads you?
You might like one of the names — you might not like any — or your research may lead you to an entirely different name.
The list is just your starting point — so get going.
Just remember the usual disclaimer: Don’t base any of your investment decisions on anything your read here. Do your own due diligence, or at least enough research to pick the right professional to do it for you.