Going to Cash Will Cost You
Despite a major rally in the foreign markets this morning, U.S. investors are waking up around the country with their collective finger on the sell button hoping to move their assets quickly to cash.However, most of the research that I've come across lately indicates that heading for 'greener' pastures is not historically as profitable a decision as holding tight and weathering the storm.
According to a recent New York Times article that takes a look at a 2005 study conducted by the University of Michigan, "From 1963 to 2004, the index of American stocks tested gained 10.84 percent annually in a geometric average, which avoided overstating the true performance. For people who missed the 90 biggest-gaining days in that period, however, the annual return fell to just 3.2 percent. Less than 1 percent of the trading days accounted for 96 percent of the market gains."
Timing is Everything
Timing is everything folks, and most investors like ourselves never seem to end up getting back in before the market bounces back. Unless the world disintegrates over the next 5-10 years, a market rebound is inevitable. Since there indeed is not much upside potential in cash today other than short-term safety, if you have the money, I suggest looking hard for value in today's bargain basement environment.
Here are a few potential candidates
Outside of the small cap arena, I've fallen in love with CreditCorp (NYSE: BAP) over the past few months only to watch share price erode nearly 50% from its 52-week high. Peru's biggest bank should benefit greatly from the country's booming economy which is expected to grow by 9.2% this year despite the ongoing global meltdown. Shares now trade at around $40 vs. $73 on September 10th.
Also, some very sexy Asian and South American ETFs including the iShares FTSE/ Xinhau China 25 Index Fund ( (NYSEArca: FXI) and the iShares MSCI Brazil ETF(AMEX: EWZ) have been battered over the past few weeks as well. Although both nations have been severely impacted by the slowdown in the U.S., both stocks are now down 50% to 60% since January 1st. If the global markets rebound majorly, these could be two of the first stocks to rally.
On the other side of the fence there is Quantum Fuel Systems (Nasdaq:QTWW). The stock ran from under $.40 to over $3.20 earlier this year and has given back most of its gains despite commenting publicly on a number of very positive developments in its solar energy business over the past month or so.
Net-Net
With Wall St. bouncing back this morning in early trading after a global market rally and a number of solid companies now trading at major discounts, we suggest thinking twice before moving too heavily into cash.
Note:
Microstockprofit.com and its affiliates hold no position in any of the companies mentioned in this edition.
Labels: BAP, EWZ, EXI, Market Rally, Panic Selling, QTWW
posted by "Staff" at
8:32 PM
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