AUB TALK: Those Risky Value and Cyclical Stocks
individualinvestor.com
Editor: Steve Taub (3/17/00)
So, value stocks and cyclicals have come roaring back. At least for two days.
Well, bully for them.
Like this Article?
Okay, I agree that it is good for the overall health of the markets that a large group of
neglected stocks are finally catching up to the hot growth pack.
More importantly, it takes Alan Greenspan out of his misery, somewhat. Although you
could almost hear him say that it is not healthy for the Dow to move up by 300 points per
day for several days in a row. Call it blue chip exuberance.
You know what they say: Every Dow dog has its day.
But, you know what? If you're investing with at least a three-to-five year horizon, the best
place to be is still the tech sector. Not beaten down blue chips or cyclicals.
Sure, cyclicals look ferocious. And on Thursday alone Salomon Smith Barney initiated
coverage of the chemical industry.
But, investing in cyclicals is almost like day trading. That's right. Think about it. That's the
very definition of a cyclical. It goes up for awhile. Then it goes down for awhile. Then it
goes up for awhile. Then it goes down for awhile.
The gamble?yes gamble?is that you can time when these stocks are going up and
when they are about to go down.
Day trading!
Now, betting on many of the beaten down stocks, which many people like to call value
stocks, is also a big gamble. You're betting that a company that has been struggling, in
some cases for a few years, will finally turn around.
Now, here's where many people make a big wager. They bet that very recognizable global
brand name companies that are way down will come back. Like it's some sort of law.
But, it's not always the case. Just look at the recent history of Woolworth, now called
Venator (NYSE: Z - Quotes, News, Boards), K Mart (NYSE: KM - Quotes, News,
Boards), Polaroid (NYSE: PRD - Quotes, News, Boards) and Bethlehem Steel (AMEX:
BET - Quotes, News, Boards).
So, of the beaten down so-called old economy stocks, the only ones worth looking at are
those that are in the midst of change and whose future prospects are much more
promising but haven't yet been discovered.
Otherwise, you're better off picking the elite tech and Internet infrastructure stocks and
don't look at them every day.
Think about it: Which five stocks do you want to own five years from now: K Mart (NYSE:
KM - Quotes, News, Boards), Kodak (NYSE: EK - Quotes, News, Boards), Kellogg
(NYSE: K - Quotes, News, Boards), Exxon Mobil (NYSE: XOM - Quotes, News,
Or Microsoft (NASDAQ: MSFT - Quotes, News, Boards), Intel (NASDAQ: INTC -
Quotes, News, Boards), Cisco (NASDAQ: CSCO - Quotes, News, Boards), Sun
Microsystems (NASDAQ: SUNW - Quotes, News, Boards) and JDS Uniphase
(NASDAQ: JDSU - Quotes, News, Boards)?
The answer is what long-term investing is all about.
My answer is that we want to own both when the price is ridiculously low, now at this point we can make good money on old, we will get out of it and get in the new ones at the right time..above 13 days MA on Comp.. after two closes,, and undoubtedly IBm MSFT JDSU BEAS PHCM SUNW TLABS are the place to be.. in new and old allocation.. old does not mean to throw out the news like CSCO or ARBA but only to reenter at good decent price.. |
