Tags: Lost | Invest | Opportunities | Permanent

Lost Opportunities are Rarely Permanent

Lost Opportunities are Rarely Permanent

By    |   Thursday, 09 March 2017 03:36 PM

In 2009, scientists at the Arecbio Observatory in Puerto Rico started receiving a signal from space. It was a historic discovery. The Observatory had been searching for signs of extra-terrestrial signals, and one was starting to some in from about 25 light years away.

The scientists asked NASA to use the Hubble Telescope to determine the source. The $3 billion satellite couldn’t pinpoint anything to explain where the signal was coming from. But the signals were decipherable.

Located in the VHF band, it turned out to be 47-year old signals bounced back from earth, specifically the BBC program Doctor Who. The BBC was excited—many of these episodes had been lost, seemingly forever. After all, these episodes aired in the days when tape storage was expensive and the thought of reruns hadn’t been developed.

That means there are no little green men, or an imminent Dalek invasion— at least that we know of. But what could have been an extra-terrestrial communication turned out to be an opportunity to get back something once thought lost here on Earth.

As investors, it seems that lost opportunities are the most painful losses of all. Everyone can relate to selling a stock before a huge move higher. Or selling a company at a loss that would have eventually delivered life-changing returns.

I get it. I kick myself sometimes over what might have been too.

For instance, back in 2003, I was considering investing in McDonald’s (MCD). We all know the company and what it does. But it had fallen on hard times, posting its first quarterly loss in its history. In the rush to increase same-store sales, the company started a $1 Big Mac promotion that ended up costing around $1.10 per Big Mac sold.

Things righted eventually, but I didn’t buy until early 2009, in the low $50’s. While that was still a bit of a discount from the stock’s pre-crash peak, I missed the chance to buy at $15 near the panic-lows of 2003.

But, as I keep telling myself, so what? I’ve made money on the stock, just at a later time. And the commodity stocks I invested in during the early 2000’s did better than McDonald’s would have. Yet, sometimes, I still kick myself mentally for giving into short-term fear and ignoring the bargain.

I know if I’m kicking myself over a seemingly lost opportunity, I’m not alone. Many investors think the same way. It’s the way our minds are wired! But that’s even worse than crying over spilled milk—at least that’s something that happens. We’re not Time Lords. We can’t change the past. And it’s not worth our time in the present to do so. It’s important to look back only to learn the lessons we need to do better in the future.

Fortunately, that’s something we can do. We can avoid future missed opportunities by finding quality names that are out of favor in the present. Since the start of the year, as markets have crept higher, a few companies haven’t gone along for the ride. In fact, they’re down double digits as I write. And chances are, at some point in the future, investors buying today would look back and be grateful that they picked up shares.

That’s because the companies I’m talking about are industry leaders that have simply fallen prey to short-term, but recoverable bad news. In other words, some of today’s best opportunities are values hiding in plain sight. Not buying them could be a future lost opportunity.

For instance, consider chipmaker Qualcomm (QCOM). It’s a position down double-digits year to date, even as the market surges higher. The company was hit by a $1 billion lawsuit by Apple (AAPL) last month. But why should a company facing a $1 billion lawsuit lose multiples of that in its market cap? It shouldn’t.

That’s especially true when you consider Apple’s claim. They’re saying the company charged more for wireless chips used in iPhones and the like. Yet Qualcomm simply licenses out their technology. They charge a fixed rate based on the sale cost. If Apple doesn’t like how much they’re paying Qualcomm, they could fix it by charging less for their iPhones.

That’s why I don’t see merit in the lawsuit—but I do see an opportunity in shares here. I’ve been buying up shares to add to an already sizeable position. I think Qualcomm’s future prospects are that tremendous.

Another opportunity today is in the Real Estate Investment Trust (REIT) space. Shares are better off than they were a year ago, when the Fed first announced a series of rate hikes. But fears of an interest rate hike later this month have sent shares down in recent days.

I don’t see interest rates going significantly higher for a long time. There’s too much debt in the system, and raising rates too quickly would send the economy into a tailspin. Thus, a slow-moving central bank should keep interest-rate sensitive stocks like REITs from getting hurt operationally over the next few years. In the REIT space, Omega Healthcare Investors (OHI) stands out to me as a bargain.

That’s because this REIT invests in healthcare facilities, a growing demographic need that can bypass a lot of the short-term interest rate fears that currently impact the REIT market. In early 2015, shares of the REIT peaked at $44.50. Two years later, they’re trading near $30. That’s a 33 percent drop in two years, but one that seems on the mend. And with a dividend yield of nearly 8 percent, investors are getting paid well while this opportunity plays out.

With dividends representing a huge portion of an investor’s return over a lifetime in the markets, buying today’s high yielders at a discount means income now without having to buy high-priced bonds that might sell off as the Fed raises rates.

As with recovering seemingly lost episodes of Doctor Who, the name of the game is patience. Investors who wait for the best companies can get them at great prices if they’re willing to wait. They risk overpaying otherwise.

It’s worth getting the best, even if you have to wait. Sometimes there are many opportunities to buy quality names at a great price, sometimes not. Quality investments at a reasonable price are few today, but they’re out there. Brave the fear for the best profits.

Andrew Packer is a Senior Financial Editor with Newsmax Media. He currently writes the Insider Hotline investment advisory, serves as investment director for the Financial Braintrust, and writes the monthly newsletter Crisis Point Investor.

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Quality investments at a reasonable price are few today, but they’re out there. Brave the fear for the best profits.
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Thursday, 09 March 2017 03:36 PM
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