One of my recent blog posts “June to Follow May” was about June being possibly a down and difficult month, well mid-way, here it is! Valuations – one the of the “Legs” of the bull market has gotten to heaven and must be brought back to earth! They call it a “correction” and I don’t know about you but I think we need one! It’s how you get into the good stocks with low risk. But! But! But! Not all stocks are created equal, in fact, in this slow-growth era, the stock you buy is crucial. Now stock-picking is not my usual emphasis in this blog but see, the bull market, the recent all-time highs are coming from a great small world of stocks only. I found a short and sweet video below from Bloomberg that could very well enlighten you.
The thing that really struck me is that the “world” of stocks, like I guess the rest of the world, is only “governed” or even say “controlled” (in this sense – how it makes the market move to all time highs or even move the indexes from red to green) by a few, by virtue of their financial power. Imagine, 5 big-cap stocks have the equivalent of 3000+ other smaller stocks. But the good thing to know there is those 5 stocks represent fair value – meaning their valuation is reasonable, in fact all are under the S&P 500 PE valuation of 16 (or so) they are still in the “cheap” side.
So yes, key words in the market these days – valuation, valuation, valuation.
Now on my watchlist are the following:
Been watching Facebook (FB) since late May which was around $58.50 on the 21st and it hasn’t even been one month and the stock has moved up to $65, this “momentum” stock might be in for a profit-taking but it’s still going to run off into high gear for years to come because of the products and services offered and growing revenues from a very protected market share. (Remember Google? Apple? Amazon, in their early years? This is the stuff of dreams!)
Apple (APPL) – which just had a stock split is showing a lot of promise, by virtue of their “affordability” making them more attractive to retail investors, (the $700 per stock is just a little under $100), plus of course the “cool” factor in their products that’s always been where they are very good at. PE is just at 15.69 so it is, for once, the APPL of my eye. 🙂
MasterCard (MA) – sure I’ve been attracted to banks which can ride the strengthening economy but I’ve found something that makes money like the banks, but does not have the risks (capital requirements, bad loans etc), but instead focus on transaction processing and payment solutions. Smart hey! It’s also just had a “stock split” so yes, the affordability factor is there and rising stock price has been achieved!
(More about stock split here!)
On my own holdings, I got BHP still on my accounts. It hasn’t been following the market much on the upside given the challenge in iron ore prices but oil has been it’s saving grace so it has been on “neutral” mode. But alas, yesterday’s World Bank report on slow global growth spooked the markets and BHP started to breach 1st level Support at 36.10, I’ve put a bearish position “covered call” to protect my current holdings. I am not too worried about the fall in price because it has low valuation (12.17 at it’s current price 35.94) and the stock price could easily be a “bargain hunter’s delight”). I think give a few days for market to shake off that report in time for next week’s FOMC meeting, which I project to be supportive of the markets.
And here of course is the promised video:
