FASCINATING TIMESI've been through a LOT of different markets, but I don't think I've ever seen a market like this one. And I'm not alone. Spend some time reading or listening to all of the different talking heads out there, and you'll find every opinion under the sun, calling for the beginning of a new rally, to the top of a bear market rally. And even more insidious, I can totally see and agree with ALL of those opinions! Isidious for sure, and fascinating.
So what do you do during times like these? Buy in? Hide your money under a mattress? Again, I would say both are valid options. But the problem with the mattress idea is you don't make any money. (To be sure, you don't lose any either). Within the market option, I do think money can absolutely be made, but you have to be much more selective.
If you're able to find that good company, on that is truly undervalued, then that is half the battle. Personally, I have absolutely NO doubt that Bombardier fits into that category. But now you have to look at Bombardier (or whatever other company you find that fits well) in the context of the broader marrket forces. This is not really hard to understand, if you think of it in the right way. Personally, I find analogies the best way to put some perspective to different scenarios.
FRiENDLY MARKET
A friendly market provides, in general, a tailwind to stocks. For stocks that are destined to climb, it generally makes that climb faster. Personally (and maybe strangely), I'm not a big fan of friendly markets, as it tends to mask whether companies are truly good or not. Take the most recent market from last November as an example. How many companies since November absoultely imploded? Tons of them. But that was a market where people were throwing money indiscriminantly at stock. Everything looked good. But it's not until an "unfriendly market" that the truth of companies is exposed.
UNFRIENDLY MARKET
So here we are in an unfriendly and turbulent market. Horrible? Umm, in some ways yes. But that is more the claim of people who bought into the crazy friendly market and have now got their head handed to them. So their view is a little jaundiced. To me, the unfriendly market provides clarity. Valuations suddenly matter. Reality suddenly matters. Earnings potential suddenly matters. And valid scrutiny becomes the norm. Then add in a healthy dose of fear and dissiullionment, and you begin to see real opportunities in the market. Those opportunities, such as Bombardier, and now in clear view.
But what does this unfriendly market mean for Bombardier? As I said before, if you've found a good company in this environment, as Bombardier is, you've won 1/2 the battle. The other component is mostly based in your own persepctive and timeline. There are three things worth noting that GOOD companies in this environment often do.
1) These good companies will continue to rise overall, albeit at a somewhat slower pace. Back to the analogy idea, it's really no different than a being in an airplane with a good tailwind or a stiff headwind. The headwind is bumpier, and you might get to your desitnation slower than you might otherwise like, but all the same, you'll arrive at where you should be.
2) In this period of scrutiny, money flow finds these good companies. It's a little bit ironic that tough times actually help good companies. But rather than money being thrown indiscriminantly in the market, at any number of companies, scrutiny focuses money flow into good companies.
3) While the good compay climbs in the tougher times, albeit slower, the market then turns eventually to good times again, and the tailwind returns. While this provides some initial relief to companies that suffered a horible drop being "correctly valued", the good company continues to rise, but often faster. The friendly market, upon its return, becomes in effect a 2nd stage booster to the climb already in progress.
If you wnat perspective of what a newly found GOOD company looks like, look no further than the 3 month chart on Bombardier. Not too long ago, this stock was trading at $18. And now it's above $30?? Yes, I'll tkae that. Pulling up that chart will also put the current drop of a few dollars into perspective. Much as we would all like the stock to continue to only climb, the current decline is still easily within the bounds of normal retracement and consolidation.
If I had to bet, I would bet on the side of a "bumpy headwind" market for the next year or so. I don't mind this at all. The climb in Bombardier might be slower, and at times bumpier, but the climb will remain here all the same. Absolutely, I consider Bombardier to be an exceptional example of the "right stock" to be in at this point in time. Gains to be had, and some real shelter from a storm that ravages companies that have been overvalued fluff for some time now.
For those who don't have a chart readily available,
CLICK HERE Now, look at the period from mid July to now. Now look at the drop the past couple of days. If you look just at the day, in the day, it's easy to be annoyed. If you look at the period from mid July to now, in its entirety, the drop is really nothing and certainly acceptable.
My personal thoughts? Continue to sit back and enjoy. And if the market as a whole temporarily loses its mind, be ready to buy the opportunity.