The Market is Off to the Races
Later this morning we are off to the races. It is the first time we have been to Derby Day. Looking at the market this week we are almost convinced that before long the Australian market will be off to the races too.
We won’t bore you with another Warren Buffett quote about being greedy or fearful or robins missing spring or anything. The fact is, you don’t need to be a multi billionaire in this market to judge when markets are at a good value.
For rapid capital growth we like the look of the small cap sector. For those that are looking for income, well, providing those companies can maintain the dividend payouts there are some pretty good yields on offer. But neither approach is entirely risk free. As we have shown with the Money Morning Uncertainty Index there have been wild movements on the markets that can turn a cheap stock even cheaper overnight.
Yet things could be about to change. This could be a cheap stock less cheap overnight. We don’t write this with blind optimism. And we don’t say after having said it every month for the last year, just hoping that this was the bottom of the market. You will not be surprised to know that some analysts have been calling the market bottom since November last year!
The financial press has had a field day during the last couple of months as one nightmare led to another. Even the mainstream tabloids and non-financial media have expressed an opinion on the ‘credit crunch.’ Everyone is getting involved and have made for the exits.
It’s at times like this when we join the queue waiting to get back in.
The reason we like the look of the market now is down to something we read about… yes Warren Buffett several years ago. He said that when he buys shares in a company he does as though he was buying the whole company. Of course, now Buffett can afford to do that.
It makes a lot of sense. Sometimes you can get bogged down with annual reports, ratios, press releases, industry news and 101 other things. The most important thing to consider is, ‘if I had the money to buy the entire company would I do so?’ Once you put it in that context it can give you a much better understanding of whether buying the company is a good investment or not.
