There's an old saying in the market: "When your taxi driver is talking about a given stock, it's time to sell." Now, first of all, no disrespect to the taxi drivers out there. Great, hard-working people. But the essence of the saying suggests that when "everyone" thinks it is that good, it's time to sell, and conversely, when it seems impossibly horrible, that's the exact time to buy. It's also demonstrated by hordes of novice investors, who buy at the absolute top, and sell at the absolute bottom with almost uncanny accuracy.
The trick then, is to do what might seem completely counter-intuitive to the overall market sentiment, at the appropriate time. Take for example last November, when the market was absolutely on fire and there was nowhere but up. At that time, I put out the following post on a different thread, but the post was talking about what I thought was coming, and why people who were in the midst of this market euphoria should show fear..
CLICK HERE to read.
Market timing is not just for traders, although obviously becuase of the short term nature of what we do as traders, that timing is crtical. But market timing is also hugely important for investors too, and absoluely can and should be done. If last November was the height of euphoria then (which it was), and we have now gone through the worse downturn in 50 years to date (which it has been), how do you look for those bottoms to time with the intent of taking a long investment postion? This is NOT as hard as some people may at first think.
First of all, the market is always a forward-looking instrument, typically by about 6 months. That's why the selling for our current messy market started last November. So if you now look at things in real-time now, the market is not looking at June. Again, think 6 months ahead. The market is starting to set their sights on next December and onwards. In this light, if there is further negativity to come WITHIN the next 6 months, for example even further Fed rate increases in July, then you can correctly assume that this has already been priced in to the market....i.e., to the makret's way of thinking, the rate hike has already happened.
So the question becomes "next December should we be coming out of this mess"? If the answer could be "yes", then there's a bottom to the market somewhere close at hand. Close as in "now"...not next December. Next, look to how aware things are to the masses. Is the economy on everyone's mind? Yes. Is everyone (including the taxi driver) talking about it?? Yes, again. Is there palpable fear in the market? Absolutely yes. Are there segments of the market that have been obliterated? Yes, tech. Yes, Crypto. The broader S&P/Dow...yes, but not the complete devastation. Some definite carnage showing up there though. Other factors? Supply chain is a mess. Shipping is a mess. All good news for putting in a bottom.
The other BIG component of finding a bottom is to get control of your own natural emotions. It is emotionally hard as Hell to be the one standing calmly in the midst of everyone else running to the exits in panic. But think. It's the exact opposite of the euphoric state we saw last November.
So the big question is, "are we getting close to the bottom"? Personally, I think it's within our view....not quite there but close enough to now be looking for good companies that have been beaten down by the total market effect, yet remain as good companies that continue to show growth. You want to look for companies where the share price has been beaten down, but the company shows signs of resiliance in the midst of severe market headwinds. It's a beautiful thing to find one of those companies, because it means you've found a company that has real strength. It's really no different than us as humans. Our true strength and resiliance is put on display in tough times, not easy times. So if you find one of these companies, you have the potential for a very strong and lucrative updraft in several ways. First, you get the overall market tailwind when it comes. But more important, you get a company that was able thrive and survive in the tough times, come to absolutely flourish in better times. This of course boosts the share price tremendously.
I think Bombardier fits this category well. In the midst of this very difficult market, the company is growing and definitely gaining strength. Their FCF is up, and up so much that they're paying off huge swaths of debt, ahead of time even. They are gaining notoriety and market share, shown via a strong order-book. But wait. They are doing all this in a tough market?? PERFECT! As an investor, you've found what you're looking for.
People grumble about the share price. Ok, I get it. Nobody likes to watch their portfolio value go down. Speaking ruthlessly, this complaining just confirms that you missed seeing the top for what it was, and didn't act accordingly. (Sorry, but it's the ruthless truth) But at this point in the overall market, where there is a bottom somewhere out there not too far away, I would suggest it's prudent to stand back, assess where the broader market is, and recognize the opportunity that is there to pick up much cheaper shares, while everyone else is running around like chicken-little. Do it up right, and you'll find that his is where the money..the big money...gets made.