Fundamental Investing: Back in business
Today's Financial News - Posted March 16, 2009
Get out your calendar and mark this day. It is the day the markets returned to normalcy. Instead of worrying about Washington’s next move, we can get back to the basics of investing. Stock pickers are back in business.
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): Today is a big day. It may not feel like it and it certainly will not make the nightly news, but the importance of the today’s action is undeniable. We are back to a stock-pickers market. There will be no more of the massive de-valuing we have endured over the past six months.
Now, I am not saying we have reached a bottom. Plenty of stocks have much, much more room to fall. But if you pick the right companies to invest in, you will make money in this market, no doubt about it.
There is no more of that falling-tide stuff to lower all ships. From here on, we will merely have to endure rough seas with some waves forcing a few ships higher and others forcing them under.
Why do I believe this? It is simple. Investors are getting back to fundamentals. Instead of worrying how Obama’s budget will cure this industry or Congress’ bailout will skip over this company, Wall Street is once again looking at what matters most, the stuff that makes a company a company. Aspects like liquidity, brand power, dilution and earnings potential are once again important investing criteria, not whether the company is simply politically savvy.
It is bad news for companies like General Motors (NYSE:GM) and Evergreen Solar (NASDAQ:ESLR) and good news for firms like General Electric (NYSE:GE) and Harley Davidson (NYSE:HOG).
Get out your calculators
There are several potential reasons for this shift. First, whether you believe Wall Street is back to normal or not, it is impossible to deny the rhetoric from the Obama administration has quieted significantly. In an obvious political ploy to boost confidence, everything out of Washington is synthetically bright and cheering.
Whether it is all a lie or not, I do not care. As long as it forces investors to look at equity investments for what they are and not some Las Vegas-style gamble, I am more than happy. Without the threat of game-changing legislation or political maneuvering, Wall Street can get back to what it does best, buying and selling stocks and creating an efficient market.
The other reason for the recent shift goes back to the very foundation of investing, fear and greed, the Adam and Eve of Wall Street. With the fear of losing over half the market’s value already realized and behind us, there is little left to fear. That means greed can prevail.
Last week’s bullish action proves investors believed the plunge went too far. The numbers did not add up. That is why buyers held their breath and jumped back into the market. With the market already at incredibly low levels, the leapers had little to lose. But their faith is paying off.
Looking forward, there is still a lot of unpredictability, but the uncertainty is not on the shoulders of the bulls and the bears. It is up to our elected officials. They have a choice of remaining quiet and letting the markets handle this mess or they can manipulate the world’s economy in the name of votes.
If they choose the first choice, stock pickers will win. If they choose the latter, we will all loose.
Fortunately, it looks like first administration of the pop-culture generation has learned its mistake. Suddenly, George Bush’s back-room style of governing does not look so horrific.
A lot of analysts and pundits are calling this a dead-cat bounce or a bear-market rally. It does not have to be if our leaders make the right choices.
My vote says we are back in business.
We welcome readers from condron.us
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