I Eat Bear

There are two things to remember whenever considering an investment. It will make moey quickly, or it will make money reliably. The converse is it will lose money quickly, or it will hold value. The market offers no guarantees, either way. But, you can't have it BOTH ways.

Oh sure, there is some middle ground, where you get a dividend, and a reasonable (but no bragging rights) stock price appreciation. Hey, that is not a bad scenario, in a NORMAL market.

But, this is NOT a normal anything, especially a normal market.

So, my advice to you is this. Throw out EVERYTHING (except one, maybe two), that the market has told you about investing.

Big, is not bad, but it is not the best. It is RELIABLE, and for some of you, that is a GOOD investment.

But, it can be improved on by so, so very much.

Ok, the two things I want you to retain, from this bear market, is the PE, is still KING. Keep that thought,,, forever. High PE's are risky, and big companies with high PE's are a formula for a disaster waiting to happen. Then again, the same is not always true of a small company. It will be, it just has not gotten there.

Some cases in point, Las Vegas Sands, a year plus ago, had a PE of almost 200. When the bear market hit, it got POUNDED. Yes, I made a lot of money on LVS because it had a high PE, and I rode it during a BULL market. But I sold it, defore the decline (not true, the decline had started, but I limited losses/ and took gains).

Today, I look at the inverse case. Abraxas Petroleum, now has a PE of 55. That would be a seriously SCARY PE in a bear market. EXCEPT, the stock price on LVS (Las Vegas Sands) at the time was over $150 a share, and the price of AXAS (Abraxas) is under a $1.00 a share.

So, everything is relative. I am not saying to invest in LVS right now, but I do think AXAS is still a buy. But I do add this caveat. I did sell some today. Heck, it had a 54% gain in stock price in a SINGLE DAY. You MUST take some of that off the table. It was a NEWS event. Yes, I still like long term, and I will be a buyer again, but you have to take profits too.

And, that is the beginning of the rest of what I am going to tell you. Would a stock price gain, and a dividend of a DOW company, give you ANYTHING, remotely close to a 54% in a year.
Doubtful, at best. I got that, in ONE DAY, with AXAS.

So, the first thing I say here, is small may be the answer to your financial prayers. You may have to do a LOT of it to get BIG gains. Then again, the RISK, is large too. BUY, and hold, for a three year plan. Expect to lose, as the future PE is 5. But, you could ride AXAS, a year or two, and likely, see the PE drop to 20 and make a TON of money in the mean time. The stock is just too cheap!

That brings me to my second point, or was it my first. The PE is KING. The bear market has done it's damage,,, for the most part. And the result, is most shipping stocks, have a PE under 5, and some, under 2. Those, are rediculously low PE's, for sound investments, even in a bear market. GNK, TBSI, and DRYS, just can't lose. Be careful about that statement though, because this is likely the most VOLITILE segment, you will EVER find. You day traders would be in heaven with shipping stocks,, if you are right 20% of the time. For the rest of you, don't even try this. It can be INCREDIBLY expensive. I have done it, and made and lost money, and lunch.

But, the PE's are too low to ignore. And, they offer decent, to above average dividends (if they offer one at all). They are SMALL RISK investments, and the POTENTIAL for gains, is extremely great. Ok,they carry debt, and debt, is a bad word right now. So, they sell a ship, instead of buying the SIX they have on order. They are PLANNING, for future. Just like you, as an investor.

Then I ask these questions. Will the world-wide demand EVER diminish, even in a bear market,, or 10? Over time,, NO! Will oceans get smaller? Not likely. Can I drive to Australia from Canada, or the US? Not even remotely a possibily. Can I buy a fleet of ships, to compete with those in the market? (Yes, maybe, but most could not). But, let's safely say, the barriers to entry to this business are substanial. A PE, of under 5,, I can't meet a 5% interest rate to even try this.

So, this I say, and give it thought. In a bear market, low PE stocks, ARE the way to make TONS of money, Then agian, low stock price stocks can be too. THOSE, are the WAYS to make a RIDICULOUS, amount of money. They are NOT the most SECURE way to get there.

My SECOND recommendation, and maybe the third. DO NOT, listen to the media. They are paid fools. Set up your OWN portfolio, and YOU manage it. OK, you get lumps. I have, and you can llok at mine. When the bear hit, I was BEATEN, more than most. Then again, I EAT BEAR. I am A bull.

And, RIGHT NOW, percentage of gain,, is KING. It always was, but this is the TIME, to invest, for percentage growth.

Now, back to the down-side. I EXPECT a serious down-turn, with an optimistic, and hopeful/FOOLISH president elect. Look to invest in March, in a BIG way.

Short term, be VERY cautious. Long term,,,, this is one of the BEST times. Day traders,,,, shipping,,, and good LUCK.

Comments: View Comments |  Tuesday January 6, 2009