Strategist Nelson: Watch for Bargains in Beat-up Stocks

Wednesday, 07 Nov 2012 05:09 PM

By Forrest Jones and John Bachman

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Stocks took a pounding in the wake of President Barack Obama's re-election, especially those that stand to lose when the administration's Affordable Care Act takes effect, but watch out for buying opportunities, said David Nelson, chief strategist of Belpointe Asset Management.

Coal producers may fall due to the president's energy policies and even stocks that pay dividends may take a dive if taxes on investment income rise.

Still, opportunities for bottom fishing will present themselves as many such companies possess sound fundamentals regardless of presidential policy.

Editor's Note: How You Lost $85,000 During the Last Decade. See the Numbers.

"There is probably going to be overreaction," Nelson told Newsmax TV in an exclusive interview.

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Take managed-care providers.

"Companies like UnitedHealthCare, which are down last time I looked 3-5 percent, those are pretty solid companies and the earnings are still pretty decent," added Nelson, also a Moneynews contributor.

"Some of the investment banks are getting very hard hit, in particular, JPMorgan, Goldman Sachs, Bank of America. They are all getting hit because probably because of increased regulation."

Also, don't blame plunging stocks on Obama's re-election alone.

In Europe, German industrial production fell more than expected in September, stoking fears the European debt crisis is now plaguing the healthiest of economies on the continent.

Meanwhile, European Central Bank President Mario Draghi said economic activity in the eurozone will remain sluggish, which further fueled the selloff.

Also expect markets to continue to roil amid investor fears of a fast-approaching fiscal cliff poised to strike the U.S. economy in several weeks.

At the end of this year, tax cuts expire at the same time automatic government spending cuts are due to take effect, a combination known as a fiscal cliff that could send the country sliding into a recession next year if left unchecked by Congress.

So, expect the selloff to continue.

"We could probably see another 3-4 percent before this all pans out," said Nelson. "These are probably the lows for this week. And I think people are going to rethink their portfolios and where they want to put their money."

Dividend stocks, long popular among those looking for income from their investments, may fall as well, as the president has proposed allowing taxes to rise on dividend payments and on capital gains.

Coal may take a beating as well though market factors are helping to push down stocks in that sector, mainly rising demand for natural gas.

"We certainly can't put this all on the results of the election. Coal stocks have been coming down all year because natural gas prices were low enough for utilities to actually make the switch, and many have and many will continue to do so," said Nelson.

"This is just adding insult to injury with the election because it is pretty widely known that President Obama, now in for a second term, he has made his views very clear. He does not like coal."

Editor's Note: How You Lost $85,000 During the Last Decade. See the Numbers.

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