Small caps and technology stocks have taken quite a hit over the past few months and I think now is a good time to start looking for bargains in these sectors.
There has been a rotation out of these “riskier” stocks with the threat of a potential recession looming but the selloff has been overdone. Some companies that I follow have lost over fifty percent of their value from their highs last year in spite of improving fundamentals.
Financials and home builders have seen quite a rebound from the lows they made earlier this year but I think it is too early to say the worst is over for these companies. I think there is going to be further losses due to the risky lending practices that have taken place over the last few years. The housing market is no where near a bottom and foreclosures are going to continue to increase. I would avoid these stocks.
I would also avoid companies that rely on discretionary income such as retailers and restaurant stocks. Consumers are cutting back on their spending and I don’t see that changing in the near future.
Whatever you invest in you should be more concerned with the fundamentals of the company than the stock price. Over time a company’s stock price will ultimately follow the improvement or deterioration in fundamentals.
Similar Posts:
If you liked this post, you can consider subscribing to our free newsletters here
Copyright © 2010 - IntelligentSpeculator.net.
Sectors to Buy and Avoid
Date posted: 02.27.2008 (10:44 pm) | Write a Comment (0 Comments)
Small caps and technology stocks have taken quite a hit over the past few months and I think now is a good time to start looking for bargains in these sectors.
There has been a rotation out of these “riskier” stocks with the threat of a potential recession looming but the selloff has been overdone. Some companies that I follow have lost over fifty percent of their value from their highs last year in spite of improving fundamentals.
Financials and home builders have seen quite a rebound from the lows they made earlier this year but I think it is too early to say the worst is over for these companies. I think there is going to be further losses due to the risky lending practices that have taken place over the last few years. The housing market is no where near a bottom and foreclosures are going to continue to increase. I would avoid these stocks.
I would also avoid companies that rely on discretionary income such as retailers and restaurant stocks. Consumers are cutting back on their spending and I don’t see that changing in the near future.
Whatever you invest in you should be more concerned with the fundamentals of the company than the stock price. Over time a company’s stock price will ultimately follow the improvement or deterioration in fundamentals.
Similar Posts:
This entry was posted on Wednesday, February 27th, 2008 at 10:44 pm and is filed under Commentary. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.