Tags: investor | commodities | emerging | market

It's Now a Stock Picker's Market

By    |   Monday, 05 May 2014 08:00 AM

After large stock market corrections (e.g., 2009 to 2014) or in prolonged bull markets (e.g., 1982 to 2000), the average investor can think they're a stock market genius.

Why? Fundamental valuations are low, in fact, usually too low at first. So there's lot of upside that can justifiably happen as the market goes back to more of a balance from an extremely pessimistic view that was had formerly.

It's in those times that you can buy most stocks and they just seem to go up — the good ones and the bad ones, the cash-poor companies and the cash-rich companies, the debt-laden companies and the ones that have managed their debt levels well.

Additionally, the average investor can just invest in a broad-based index fund, like one that tracks the S&P 500, and do quite well during those times.

However, toward the latter innings of a bull market, it flips to being a stock picker's market. This is where you've really got to know your stuff. It's also where you have to really work hard to find pockets of value in the market because they become very hard to find.

Near a market top, most sectors of the market will be overvalued. That's where we're getting near now, here in the United States with our stock market.

It's then that you've got to look to niche industries rather than broad sectors or you've got to look into the one or two sectors left that aren't overvalued and that has had such horrible investor sentiment that no one wants to invest in it. (An example of this during the past year would be commodities. They were despised and no one wanted to be in them. Yet they were the place to begin buying).

Then sometimes it will get so bad that you can hardly find any sector or industry that's undervalued and so you've got to screen for individual companies themselves that are solid yet out of favor with investors. (An example of this was Apple near $400 per share. No one wanted it then. Yet "everyone" wanted it near $700 per share).

Well, as I said earlier, it's now become a stock picker's market. So where are the values to be found right now?

Gold, silver and other commodities like corn, sugar, certain steel stocks and some foreign oil companies.

But the newest inflows of money that I'm seeing are going into foreign currencies such as the Australian dollar and the Canadian dollar and also into emerging market stocks in places like Turkey, Indonesia and Brazil.

These areas of the financial markets are still hated by investors and still produce value but hardly anyone is there just yet. That's the time to buy.

Most of these commodities, currencies and countries have exchange-traded funds that make them easily tradable right through your current brokerage account.

So while novice investors are still infatuated with the popular momentum stocks in the United States, the informed investor should be taking a look in these areas mentioned above, before the crowd gets there and drives up the prices.

About the Author: Sean Hyman
Sean Hyman is a member of the Moneynews Financial Brain Trust.
Click Here to read more of his articles. He is also the editor of Ultimate Wealth Report. Discover more by Clicking Here Now.

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After large stock market corrections (e.g., 2009 to 2014) or in prolonged bull markets (e.g., 1982 to 2000), the average investor can think they're a stock market genius.
investor, commodities, emerging, market
Monday, 05 May 2014 08:00 AM
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