The question for investors, after watching many companies' share prices recover and even go on to be multi-baggers,
is whether those shares warrant continued purchases. Let's try to
answer this question for copper, gold, and molybdenum producer Freeport-McMoRan (NYSE: FCX), which has watched its shares rise from just under $17 in early December, to touching $30 in February, and on to a close above $70 yesterday.
I'm what a lot of folks would call "obsessed" with finding great stocks. So when I heard Goldman Sachs oil oracle Arjun Murti boldly label a company as the world's greatest, you'd best believe I paid attention.
Of all insight I've heard over these few crazy months, the most telling
came from an investor who appeared on CNBC last fall and, being
entirely serious, advised, "There're only two positions to be in right
now: cash, and fetal."
After months of outperformance, there's a yawning pit of downside risk
lurking beneath many consumer discretionary stocks. Yet strong
companies whose shares have lagged the sector deserve a look. Those
criteria have led me to footwear and athletic apparel king Nike (NYSE: NKE).
I have no doubt that the valuation tool most widely used by individual
investors is the price-to-earnings ratio (P/E). Unfortunately, it may
also be the most dangerous tool, because it's so
misunderstood. Today, I'll talk (well, type) a little about what the
P/E's problems are and how you can overcome them.
Low interest rates
have worked wonders for debt-ridden consumers. For those who have cash
they need to invest, however, low rates are causing a bunch of problems.
Anyone else think that a stalemate on health-care reform is becoming
increasingly likely? The bipartisan "Gang of Six" seems all but broken
up. Proposals by one side are hated by the other, and the bipartisan
proposals are hated by all.
You've no doubt heard the Wall Street adage "buy the rumor, sell the
news." The idea is that, by trading on some rumored positive news for a
stock, you will take a position ahead of the crowd, and then sell as
other investors rush in when the rumor is confirmed as a fact.
Consumer stocks are now as risky as they've ever been. Unemployment’s
historically high, consumers are spooked, and subpar earnings abound as
companies pay the price for lost competitive advantage or fiscal
irresponsibility. But tough times can offer investors the best chance to buy stocks.
Lately, I've noticed that I've become much less of a Mac user, and much more of a Google (Nasdaq: GOOG) user.