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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Spekulatius who wrote (16474)	2/21/2003 2:49:12 AM
From: Paul Senior	Read Replies (2) \| Respond to of 78663

Spekulatius: You are likely right. I'll add some comments. Regarding: "In my opinion, the strongest companies will recover first when the economy recovers and there will be a sweet spot when jumping into the 2nd tier companies will be more profitable as the bull market returns." Perhaps it depends on the particular sector or what is meant by "strongest". Here's a comparative chart of CCL and RCL: finance.yahoo.com Sometimes RCL has risen more than CCL when both stocks were down. Perhaps that's when the sweet spot kicked in. Some of this could be attributed to RCL's increased leverage. If the industry is turning around to prosperity, investors might guess that RCL will show the greatest gains (per earnings improvement and ROE) and so this stock might be the one to bet on if the sector comes into favor. OTOH, maybe not. When both stocks drop,it looks like RCL is often dropping further and taking longer to recover. That's not so good. My experience with this sector mirrors the results I've often got before. Which is, given a choice among several, if I pick one, I pick the wrong one. So now that these two stocks are again down near lows, I shall attempt to do what I believe I should have done before and that is to buy the package. I have a starter position in RCL. As I see CCL come down a little, I'll buy it also. I've mentioned I'm using this tactic with other sectors too. For example, I have a position in auto retailers -- small positions in several companies like UAH, SAH, GPH. Here the stocks seem low on a number of financial ratios, but it's impossible for me to determine which might be the better or best investment. (I am assuming there is an investment opportunity in the sector, and I could be wrong about that as well.) With this tactic I expect I will forgo some gains by not searching for the "best" stock in the category. However, at this point, where any gains are hard to come by for me, I'd settle for obtaining the average that might be achieved from an improvement in this presumed undervalued sector. jmo, and I offer no good data to substantiate the efficacy of this tactic.