With major US stock market indexes negative for the year, many investors are wondering if it is time to bail on the stock market. Plenty of investors have not forgotten the painful period between late 2007 and early 2009 where the stock market collapsed and many investors saw their account balances cut in half. And now with the high volatility we’ve been seeing since August, investors are scared.
However, we at Blue Harbinger know that if you are a long-term investor, bailing on the stock market now is the complete wrong thing to do. In fact, if you have a long-term investment horizon, stocks are cheaper now than they were at the end of last year thus making now an even better time to invest.
Of course you’ll hear all kinds of gloom and despair in the media, but the truth is if you leave the stock market now, you won’t know when to get back in, and you’ll very likely miss out on a great rally. In fact, this is exactly what happened in the panic of 2009 when many investors sold and never got back in. They missed out on one of the greatest stock market rallies in history whereby stocks more than doubled in value in the years that followed and investors made back all of their losses and then some.
Further, if you’re working with a full service stock broker, selling now and then buying back later only lines his pockets with your money. Don’t forget that stock brokers charge very high hidden sales charges every time you make a transaction (buy or sell). This, and other hidden transaction related fees throughout the industry, are another great reason why you shouldn’t sell now.
Before getting into the specifics of Blue Harbinger Stocks for this week, I’ll leave you with a quote from the famous 18th century British Banker, Baron Rothschild, and its one that famous investor Warren Buffett likes to quote today: “Buy when there’s blood in the streets.” It’s basically a hat tip to contrarian investing. It means to buy when things are on sale.
Blue Harbinger 15:
This week we received positive news on two of the holdings within the Blue Harbinger 15. First, Facebook announced a major initiative regarding its recent purchase of virtual reality company Oculus (they'll be selling virtual reality goggles to be used by video gamers). You can find more details on how we view this initiative here. Second, business services and consulting company Accenture announced earnings, and they were positive (especially positive with regards to their digital services and cloud services businesses). You can read more on how we view the announcement here.
Stock of the Week:
Our free “Stock of the Week” this week was Amazon. The article reviewed the company and stated there is a feasible path for the stock price to rise to $700 per share (it’s currently around $525) While we at Blue Harbinger do believe strongly in the incredible earnings power of Amazon, it is not a company we invest in at this time for two main reason. First, the company spends so much money trying to achieve future growth that their bottom line net income is usually negative. They don’t have any money left over to give back to shareholders for dividends or share repurchases. Of course this may change in the future, but for the time being we don’t invest. And second, Amazon’s stock price is extremely volatile and it has already rallied tremendously this year (it’s up nearly 70% while the overall stock market is slightly negative). If we were to invest in this company, we’d likely wait for a little bit of a pullback… you know… a “Buy when there is blood in the streets” type of thing.