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

To: Mario :-) who wrote (60119)	11/24/2017 6:45:59 PM
From: E_K_S	1 Recommendation Recommended By Mario :-) Read Replies (1) \| Respond to of 78748

You might want to do some Google searches on Sector Cycles and Sector rotation. This was never taught to me in my college economic courses when it is very important for investing. We all know about the real estate cycle but many other sectors also have their own economic (life) cycles too. The value investor will find under valued assets at/near the lows of the economic cycle which each individual sector tends to follow. The hard part is how deep and long is the cycle low, what is the catalyst for the cycle to turn higher, is it part of a larger (economic) sector rotation and many other factors that may/can cause long up/down cycles. Interest rates and the Federal Reserve can impact the economic cycle. At sector lows, Price/BV are close or less to 1.0, PE's are usually <10 or maybe no earnings just loses, large amounts of debt impact profitability (ie too much leverage), cycle low may/could be due to low commodity prices (Buffet never liked to own companies where revenues were impacted by commodity prices), FCF declining and basically, the company is spinning downward due to supply/demand imbalance. If you can time your value Buys at the start of the up-cycle (from some long cycle bottom) and pick the strongest companies in that sector, there are some great gains to be had. The home builders (ie real estate) has always been subject to economic cycles but I never could really figure out what/when to Buy them. Auto makers, steel industry, copper miners, durable goods are just a few that are impacted by sector cycles. When I do my GN screens, many stocks come up as undervalued simply because the sector is at/near year low. EPS are falling and analysts have cut their earnings estimates. Currently many retail companies are in this position. This may not be due to sector/cycle low but from some new disruptive business/technology (or a combination of both). You might look at CAT, DE and other heavy machinery industrial. These are considered very cyclical companies. See what/how analysts categorize them over the 90's, 2000's and now. My observation is with every deflation down cycle/sector, big opportunities present themselves but when/what to Buy becomes the challenge. If in doubt, buy a basket of these companies. Good Investing EKS

To: Mario :-) who wrote (60119)	11/24/2017 9:33:49 PM
From: Paul Senior	1 Recommendation Recommended By Mario :-) Read Replies (1) \| Respond to of 78748

Easiest sectors to learn FA? Analysts often use key operating metrics that are unique to a sector, such as RPM - Revenue Pasenger Miles - for airline stocks, net interest margin for banks, etc. These are easy enough to get acquainted with. Then there are the people who just use discounted cash flows for everything, or maybe price/stated book value (what I've been accused of doing ( - _-.) So with that, that aspect of presumed FA would allow any sector to be chosen and looked at, if these are the predominant or only factors of FA being used. It seems to me that if a person is doing deep fundamental research, SWOT (strength,weakness, opportunity, threats) including digging deep into the financials of the company or sector, one might consider choosing a sector or sectors first where the accounting is easier to understand than sectors which seem (to me) to have their own arcane accounting methods -- such as with banks, insurance companies (especially), maybe retail (with off-balance sheet commitments), shipping, and so on. (OTOH, maybe garnering knowledge in these sectors is where the opportunity is, because so many analysts fail to adequately understand the accounting here.) I might start with something that "seems" straightforward like distributor stocks. Or maybe something in the raw material sector.