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Buy strong sectors, sell weak ones

Posted August 27, 2008

"Does it get any uglier than banking? But investors have been recently pouring into banking in the belief that bank stocks have bottomed and are gearing up for a nice climb up the charts. Even if they do start to climb, it will be a sucker’s rally. Weak sectors are afraid of heights." — Andrew Gordon

by Andrew Gordon

Baltimore — (TFN):  This seems obvious, yes? But too often, people invest in weak sectors and avoid strong ones. Here are some of the culprits behind this backward thinking:

  • Bargain hunting. Strong sectors are expensive. Weak sectors are cheap. Unfortunately, when you invest in sectors where demand and other fundamentals are deteriorating, you often get what you pay for.
  • Bottom fishing. Does it get any uglier than banking? But investors have been recently pouring into banking in the belief that bank stocks have bottomed and are gearing up for a nice climb up the charts. Even if they do start to climb, it will be a sucker’s rally. Weak sectors are afraid of heights.

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Posted by Andrew Gordon · Filed Under Investment Strategies 

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