I am very excited about what I am seeing in the market. Not that we're out of the woods yet, but rather that value is starting to do what it is supposed to do. For the first time in years, the big stocks are breaking down. Look at GE, Dell, INTC, MSFT, MRK, - and especially Buffett favorites KO, AXP and G. In previous downturns these stocks held up remarkably well, despite their insane valuations - because they "perform". Once they don't "perform" what reason is there to own them.
Now take a look at dirt cheap value stocks. Case and New Holland looked very nice this week. Metals stocks like Phelps Dodge and especially Freeport (FCX) are getting attention. And I could not be happier owning USEC.
This is a change. Are we going to see a shift in market leadership? And what is going to emerge as the new "place to be". 1) Dirt cheap small caps? 2) Washed out cyclicals? Or 3) are we seeing the mother of all buying opportunities in the megacaps? Either of the first two means value investors are going to be very happy, while if the third happens, I'll bang my head against the wall in frustration. I know we don't do a lot of macro on this thread - I don't either - but this is what Wall Street pros will be agonizing over until Tuesday. The answer as of today is "we don't know" - which scares the hell out of these guys.
What I am spending my time on this long weekend is AXP, MER and MWD. I don't understand financial stocks well, even though I used to work for MWD, but I want to understand them better by Tuesday because I sense there are some phenomenal buying opportunities in this sector, which is still in free fall. The time to buy your favorite is probably when Latin America falls apart next week. The time to pick your horse is now. Right now my horse is MWD, but only because I know it so well as an employee for 4 years and now a customer. This company has a franchise if any does, and the stock has been clobbered. Maybe its still not there, but its time for me to figure out where "there" is. The biggest investing mistake I ever made was selling my Morgan Stanley shares when I left the company.
Jim |
