Sectors to Buy and Avoid

By: ispeculatornew
Date posted: 02.27.2008 (10:44 pm) | Write a Comment  (0 Comments)

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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.

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