Summer Stock Swoon? Time to Buy

Friday, 08 Jul 2011 11:33 AM

By Bill Spetrino

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When it comes to shopping, people love a bargain.

 

If you doubt it, just watch the news reports the day after Thanksgiving, where people stand in line for hours to get into a store that’s otherwise open every single day of the week, and actually trample each other to get their hands on some cheap TV set or computer or “gotta have it” toy for their kid.

 

Whether a bargain in a store, online or elsewhere, people almost seem to get a “high” on nabbing a desired object at what they perceive as a great price. Heck, there’s a show called Extreme Couponing on cable where people obsess over getting incredible deals at the grocery store.

 

Then the cameras follow them home and you see piles upon piles of product hoarded in their homes — for these poor folks, the mere saving of money triggers a euphoric reaction even though the soap or canned food or whatever else they buy they don’t even need.

 

You’d think with bargain-hunting such a popular sport in our culture, that the feeling would permeate to every market where sales occur. But in a very prominent example, that phenomenon just does not happen.

 

In fact, when a sale does occur, people run screaming for the exits, and actually sell their products for a song to anyone who will take them, no matter the loss, and no matter the value they once ascribed to that very same asset.

 

I’m talking about the stock market, in case you haven’t guessed. What is it about the stock market that elicits such a strong reaction against the idea of getting otherwise valuable assets on sale?

 

Honestly, I don’t profess to know. That’s because I don’t feel the same way when the stock market drops precipitously. When that happens, I get the surge of excitement that perhaps others feel when they knock an old lady aside at the shopping mall to get their hands on the last piece of clothing on the half-off sale rack.

 

Who knows, but what I do understand is that I’m happy to take an incredible asset off someone’s hands for cheap.

 

That brings me to this month, and the idea of the usual “summer swoon” in stocks.

 

With that in mind, you’ll want to watch for equities that go on sale this month. The majority might panic at signs of a selloff and exit their positions with the rest of the herd.

 

They may find excuses to rationalize the behavior, pointing to this or that negative economic statistic that’s being touted by the mainstream financial media as some sort of economic Armageddon. These days, such stories talk about Greece, or unemployment numbers, or manufacturing data … any government report, really, can be trumped up to be the big “sign to sell” that bears are eagerly awaiting.

When the markets fall, long-term investors win because they get lower entry points into good stocks, and thus have more upside potential when the bulls start running again.

 

Just look at some of the bargains people may have picked up in June, often a down month for stocks:


On June 20, you could have bought Apple (AAPL) for $310.50; yesterday it closed at $357.20.

On that same day in June, Netflix (NFLX) was $240.12, and yesterday it closed at $292.42.

I had told subscribers to my newsletter, The Dividend Machine, to buy Visa under $73.50. It dropped to $73.11 on June 27. It closed yesterday at $90.15.


And if you believe all the armchair pundits, Microsoft is dead now as a stock, right? Well, my subscribers who grabbed it around $23.65 on June 16th saw it close yesterday at 26.77.

See what I mean about bargains? Don’t fall for the pundits calls for doom and gloom — remember, most talking heads you see on TV haven’t achieved wealth solely through investing, so their predictions should be taken with more than a grain of salt — and don’t follow the herd mentality.

 

When the stock markets fall, smile amidst the panic, because that just means it’s time for you to do a little shopping. 

© 2014 Moneynews. All rights reserved.

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