''The Bottom'' it's like horseshoes & hand grenades - close counts !
For all the bears who want to short or be in cash; no problem. No one can doubt your sanity at these levels. The problem is there seems to be an allmost jealous chastising going on towards those whom are choosing to buy here... With stocks like TCMS trading in spreads from $5 to $29, or UTI trading from $10 to $48, or even CDG trading from $21 to $80; one does not have to be at the exact bottom to be making what fact, history and statistics have supported as prudent and ultimately highly profitable returns that are very likely to greatly exceed the returns of the overall market going forward to the mid to longterm.
The great fallacy is that momenteum buyers, market timers or traders somehow can or do correctly interpret upward trends that are ''the'' big run from head fake rallys, dead cat bounces etc. and even more comical, that they will ''get off' at the big downturn - and not mistakenly bail out on a basing correction only to miss continuation with an even longer leg upward... By shear definition they will buy high and sell low... This is the ultimate Monday Morning Quarterbacking. However; one must use common sense here; drillers have more downside than selected service companies, land drillers have more downside than deepwater drillers etc. We are not at an area where wholesale accross the board buying is smart. But, selectively we are seeing some companies basing at their bottoms.
FGII is a good example where common sense and human analysis must be used. Here is one of the best long term growth companies, a true niche leader -a wonderfull company. So why with it's relatively equal PE to competitors and even better EPS growth going forward - does it keep selling off lower ? Why is it perhaps NOT a prime candidate to buy now ? Simple; this stock has had such a great run from it's initial offerng last year and for investors who got in early last fall; that even at these dramatically sold off levels; people are still holding 40-50-60% YTD profits in FGII. There is still a lot of profit that can be successfully taken off the table by FGII share holders; not many other stocks, very,very few in fact -can say that in the patch. So use your brain there are solid buys here, right now ! Analyze and think.
Another point is that the bears seem to forget that todays prices have the worst case scenario's going 6 months forward, all ready priced into them... don't tell me that the street isn't betting on or doesn't have factored in, OPEC blowing the deal etc. There is an all most artificial mathematical advantage to going against the grain in a major momenteum selloff. Use it to your advantage. Look for the baby's that got thrown out with the bathwater ! In the E&P sector there are some producers who have hedged their crude and gas production, but are selling at the same exact levels that their non-hedged competitors are... look for these type of scenario's - they are out there !
Recent comments by James Cramer (whom is loved on this thread) and the well respected Oakmark Growth Fund manager; have recently stressed that there comes a time in a selloff where you must trust the fundamentals and not the trend. The trend can be your friend, but also your worst enemy...
History from the time of Ben Graham to Warren Buffet have taught that buying fundamentally strong businesses in times when their sectors are oversold, downtrodden and unpopular; are historicaly very profitable. We have an example in UTI, of a stock that can be a 5 bagger (10 bagger on margin!) just in retracing to it's former highs. It does not have to go anywhere near that to be a great investment that will probably double the S&P's return. There comes a time where even another 10-15-20% possible but not probable downturn, is far overshadowed by a probable 50-75% return and a possible 1-200+% return ... Selectively, we are at price, book value, and cash flow valuations in some individual companies where the ''bet'' is so loaded in favor of the investor - that they're virtual longterm no-brainers. Low or no debt companies, service companies with large backlogs and low PE's and sub-sector niche companies are fundamentally and mathematically solid common sense investments.
To each their own... but those that are ''working too hard'' on convincing others that this is not ''THE'' bottom are missing the point - you only have to be close at these valuations to achieve great returns. Does anyone think that EVI will not be a $50-$60 stock with in 2 or even 3 years ? If it gets to $50 in three years - one has a 33% annual return for the next 3 years ! - Anyone willing to lock that return in ?!?! Be realistic folks... Sector Rotation will come, maybe later rather than sooner, but it allways will come... And Oil will return. At current prices; it no longer matters if we go 30% lower short term - WHO CARES ! - EVI will give you 33% + over the next 3 years; it's just that simple. You also, do not have to jump in with both feet, just start averaging in....
These $2-3 moves in solid stocks like RIG, tell you that the institutional buyers are more nervous than a whore in church; they very badly do not want to miss the boat. There is huge pent up demand here. When the big boys do get an ''inside whiff'' of favorable OPEC numbers after we've started to base - some of these stocks will blow through $6-8 moves before anyone even knows why...
In my opinion; 40-60% of your total $ allocated for Oils right now is not reckless. Save the next 20-30% for a 20% correction and the final remaining 20-30% for a ''true end of the world'' 2nd correction another 15-20% beyond that, or use it to buy in fully when we base above $15-$16 or $16-18 oil - or whatever you are comfortable with. For those than have fresh money here this is a no-brainer. For those that have taken the big hit's; if you're going to average down divide your remaining funds accordingly for 2 moves... This is a game where ''close'' counts and it pays well ! |
