A while back, I explained my strategy of bottom fishing low-priced stocks after a huge market sell-off like we got from the first week in February through March 9. The risk / reward / Costanza coefficient of asshattery is just too good to pass up. Just remember this when we hit the next bottom. Keep going back to this wellspring of prosperity.
That said, it ain’t over ’til it’s over. In other words, do you hear any 300 lb. ladies in Viking hats singing Wagner arias? Exactly.
Don’t make the mistake of selling this thing short, too soon. As you may recall, I sold out over 30 stocks near the end of March, harvesting 21% in two weeks, because I had a hunch things were going to turn south. I cannot bear to even eyeball the returns I’d have now, if only I’d let them ride. I ventured a painful peek and I think it would now be north of a 76% gain on the 30 stock portfolio in less than a month!
“If only….” .
Those are words to beat myself up by. But I won’t. (I always win fights, so it’s not fair). There will be more opportunities in this wonderful and volatile market.
So my advice to you is: let the big dogs run. (Ok, now I probably just top-ticked this rally, right?). In the case of “El Cheapos”, let the little dogs run until they blow the doors off the big dogs. Case in point, I bought FOE last Friday at $1.68467 average cost. It closed today at $2.93. Up 73%. The percentage is what counts. Only the decimal points determine whether it’s a big dog or a little dog. Any big cap/big dog stocks you know make 73% in a week? However, there have been tons of “El Cheapos” that are rocketing up 50%, 75%, 100%, 200% in the past 3 three weeks alone. Get my drift, Einstein? Stick with the little guys for now. If this is the bottom of the market, and we’re rallying back from death to comatose, these could be buys of a lifetime.
There are still some cheap stocks and funds out there, especially in the REIT sector:
[[SRO]], $0.54 ( +100.00% since 03/09/09)
[[RQI]], $2.87 ( +93.29% since 03/09/09)
[[NRO]], $1.55 ( +91.40% since 03/09/09)
But don’t take my word for it, do some research of your own. Many cheap low-priced stocks are selling at fractions of book value. We haven’t seen this kind of environment in well over 50 years, maybe even since the Depression. Get serious and start digging. Recognize that crisis does also translate into opportunity for those smart enough to work at finding the bargains of a lifetime. They are out there people.