As a contrarian style investor I don’t like to follow trends necessarilly. I try to look for undervalued stocks that are oversold. By doing this, you can find good deals on stocks that aren’t where they should be. However, we are still in a very strong bear market and finding stocks at the bottom is increasingly difficult.
I try to stick to my guns and sometimes it means trusting that in the long run, solid companies usually come back to previous levels, or at least to levels where you are comfortable taking a loss.
Apple, Inc. (AAPL) is one of these undervalued, oversold stocks. If you want to know why it isn’t performing like it should be you have to understand how hedge funds and institutional investing works. Hedge funds tend to buy many of the same kinds of stocks. That is to say stocks that trade in the same industry. When they need to free up cash they sell off the strongest stocks which can create a wave of selling by individual investors because it easily incites panic selling in an otherwise solid company.
The key thing to remember is these are just pieces of paper. You don’t need to be an Apple fan boy to own the stock and you don’t want to get emotional about being down or up too much. Take profits when you can and if you can, limit your losses quickly. I prefer to buy stocks in steps on the way down and trim off profits on the way up. This way I don’t panic about a stock being down, I just know I’m getting it at a better price.
Wells Fargo (WFC) is also down quite a bit from earlier highs this year and the merger with Wachovia is going smoothly. I know this because I work for Wells. When the stock dipped to $20 earlier in the year I began buying it aggressively in my 401k and I know that long term it is going to previous levels. 2 years ago Wells Fargo split 2 for 1 when it was in the mid 70s. So really, it should be trading back in the 30s within 18 months.
After the speeches yesterday confirming what I have been saying for a year now (that we are in a recession) I am no longer so pessimistic as much of the industry is and there are a lot of ways to make money even in this bear market.
For one, you should be learning how to short sell (sell high, buy low) so you can profit when the market is up or down. I recommend buying Pennystocking by Timothy Sykes if you want to learn how to really make money short selling. The $300 pays for itself in one successful trade. I suggest reading the website and the numerous testimonials. I’ve watched the DVD myself and it’s very thorough, takes you through step by step the exact process Tim uses to make his trades and DVD 1 begins with the very basics from terms you need to know to looking at a few charts.
For the time being there aren’t any stocks that I could say go out and buy but I do like JCG, AAPL, WFC, WMT, F(on bailout news), LMT and DEO. These are all down a lot but I believe will perform well in the next couple months.
