Since March of this year the stockmarkets have basically only gone one way - up, so you may be thinking that this is not the time to buy stocks. The low in March on the DOW was around 6600 and famously on the S&P 666, as of this moment the DOW is at 10,500 and the S&P is at 1111, that is a big leap in just 9 months. Personally I have been putting buying stocks off for well over a year, expecting the stock markets to crash back down to the March lows for months now, and I was not alone - see - online stock trading and stock trading for beginners. But I have been wrong, which is probably why I would be well-advised to leave the stock picking to others.
There are plenty of stock market experts and analysts however, who say that even after the sharp rise since March stocks are still cheap ! Ken Fisher, who writes for Forbes, is one such person. He has been working in the industry for 37 years and one of the things he argues is that generally "the bigger and scarier bear markets have been, the bigger the floodgates have opened toward the view that the new problems are just too big and bad to overcome". But he says this is all nonsense!
Globally, stocks are very cheap he says, and they are also cheap when compared with bonds. Ken Fisher's advice is to be bullish but avoid the biggest U.S. banks, instead you should be looking at materials, industrials and technology. More importantly, invest overseas (i.e. outside the U.S. stockmarkets), where opportunities are the best.
The companies he recommends you take a look at are:-
AustralianAlumina Ltd. (AWC) one of the lowest-cost producers of aluminum ore and alumina in the world, via its 40% stake in Alcoa World Alumina & Chemicals. China keeps on adding capacity for bauxite and alumina, so Alumina will become even lower cost than it already is.
Braskem (BAK) which he recommended at 4.5 in his Apr. 27 column. Brazil's leading petrochemical firm. It sells at only 40% of annual revenue. One day he expects it to sell for three times that on higher revenue.
China's Semiconductor Manufacturing International (SMI), their largest silicon-wafer fabricator. It only has $1 bn in annual sales but this should grow quickly. It's losing money but the balance sheet is strong and sells at just 60% of book value and 1.2 times sales.
Emcor Group (EME) - involved in industrial construction and services such as electrical installation and air-conditioning and heating for commercial, government and industrial clients (in ther U.S.). It is selling at 13 times forecast for depressed 2009 earnings and 30% of annual revenue, which means you will be paying maybe 4 times 2011 earnings.
It has to be pointed out that the DOW is at a critical juncture at 10,500 and needs to get above this level and stay above it, as otherwise we would still be in a long-term bear market and a move back down in the stock markets is still not out of the question.
I personally am still not convinced the stockmarket is out of the woods but if the DOW gets above 10,500 and stays there then maybe I will finally join the bullish camp, by which time of course it will be too late and the markets will really crash! [UPDATE : The DOW did get above 10,500 but it didn't stay there very long and is now at 10,067 - Feb. 1 - so I'm still not convinced by this rally!]
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