Knowing what to buy in the stock market is the real key to making money. Knowing when to buy and sell is almost as important. If you are a ”buy and hold” investor, timing matters less- and having patience with your decisions becomes more critical. For everyone else – and that probably means everyone reading this note – entry points really matter.
Think about the commodity gold for a minute. Over many years, gold has done a great job for investors. Owning gold has helped offset inflation and allowed you to maintain your purchasing power- and that in itself is success according to Gerald Loeb, one of the greatest investors of the last century. However, if you bought gold when everyone seemed to be clamoring for it a year ago at almost $2,000/oz. you might have already taken your lumps and “gotten stopped out”. Suddenly it is almost a consensus that gold will fall further in price- maybe time to buy a little? I did this week.
Three months ago, almost all oil related companies were trading very strong. A group of companies that supplied sand for fracking were going higher almost daily. They ranked up very highly on The Magnet® Model in terms of revenue growth, cash flow acceleration, and profit margin growth- the real hallmarks of what I love to see. Even the valuation on these companies was good. The problem back then was that there was too much price momentum in these companies. Suddenly, the price of oil dropped enough that you actually heard commentators suggesting that fracking would stop all together because oil prices would no longer support fracking. I believe cool headed investors have been given a gift and I have been buying aggressively in the group.
While I do not like to buy stocks while they are going down, I watch volume carefully. When the selling gets exhausted, and volume dries up at long term technical support levels, I start to buy. No one is good enough to buy at the exact bottom, so I like to find areas to accumulate. I believe the pessimism in both oil and gold have presented great entry points. I am now in with both feet.
Longs- Emerge Energy Services LP (EMES), US Silica Holdings (SLCA), Barrick Gold Corp. (ABX), SPDR Gold Trust (GLD)
By Jordan Kimmel, Chief Investment Officer at Investview, Inc. (INVU). Jordan can be reached at [email protected] or 732-380-7271.