Bargain Bin Blue Chips Update Q2 Week 3Pop1440 views 2012-04-23 12:11 Tags: blue chip dividend bargain bin
The DJI closed at 13,029.26 on Friday, up +1.40% from last week's close.. The Dow is up +96.61% from March 6, 2009.
As I started doing last week, my bargain bin stocks will now have
book value listings along with buy price, dividends etc. I understand
that for a stock to be a bargain it must be at a price of at least half
of book value. So I have revised my preset buy prices for the following
stocks to reflect this new addition to my "stock purchase
fundamentals". I am calculating book value by subtracting total
liabilities from total assets and dividing the remainder by the total
common shares outstanding. Based on my new revised preset buy prices, only Soc. Gen. is under-priced but I am not yet in the habit of buying European banks.
In addition to revising my buy prices lower, I am also rethinking my whole philosophy of when to buy these stocks. As the post '08/09 bull market grows older, the chances of another big crash increases. Slowly but surely, the statistical chances of another steep and prolonged Mr. Market downturn is increasing. Eventually, it will just happen. When it does, if it is anything like the last one, pretty much all stocks will fall in tandem, bottom more or less in tandem and then rise together once again. As J. Pierpont Morgain replied to people asking him what the stock market would do he said, "it will go up and down."
I have another 40 years of investing in front of me. Even if there is a steep downturn every 10 years only, it will be good enough for me. I will have 4 chances to buy low and another 4 to sell high - it is good to not be greedy (especially if you are not too smart!). Recent history indicates steep downturns and prolonged upturns happening more frequently than this though. After record highs of 1999, the stock market crashed to lows in 2002. That was the time to buy. After a prolonged 5-year upturn ending at Dow 14,000+ in 2007, it crashed to less than half that in 2009 and that was another time to buy. Then it had another prolonged rise and that is where we are now. Those of us who are more or less 100% cash are in the best place in my humble opinion. Investing in a longer term time horizon is the comforting and easy way to invest. I don't have to be too smart to do it right.