Friday, October 24, 2008

Global Panic - But Don't Lose Sight of Opportunity

Global economies are swimming deep in recession which disappointing earnings have long since confirmed. Believing otherwise is to live in a bubble of a different kind.

But where there is fear there is opportunity. The key to success is to play small and win big. For many this means dollar-cost-averaging; buying small and often. For others, where trading costs are high(er), it's about buying the stalwarts trading at discount.

Some may look to companies which have survived the Depression and two World Wars. Although it's unlikely big name financials, or a company like Ford (F), est 1903, will find many takers:

Although smaller regional banks should benefit from the trouble in the bigger names; as an example in this sector is Bank of Hawaii (BOH), est. 1897:

Some (younger) companies look like they will be around for another 100 years. Take McDonalds (MCD), est 1940, which has has attracted interest in the blogosphere here, here and here. The chart is not without its bearish grumblings - but even if they were to come true it would only take the stock back to 2006 levels.

With the loss in gloss of financials as a traditional 'safe haven' don't be surprised to see a larger slice of pie dished to a tightening group of so called 'safe havens'; and in particular, Big Pharm. GlaxoSmithKline (GSK) is the world's second largest pharmaceutical company and trades on both the NYSE and LSE. It's trading at a substantial discount having breached 2004 lows.

Supermarkets aren't likely to disappear anytime soon. In the UK you can look to the main player Tesco (TSCO) or discounter Morrison (MRW). Both will likely recover from the fear selling which has gripped all stocks:

For Irish Stock Buyers there is very little which gets the juices flowing. Flying under the radar is food company, Kerry Group (KRZ), which has neatly avoided the seller's attention Irish banks have attracted:

These few stocks are examples as to what to look for in the discount bin of your local exchange. They are not individual reccomendations but their price action says something about the nature of their stockholders. Can they go lower? Sure - good and bad stocks go down in a panicked market. Will they emerge stronger? On a relative level many are already leading the pack and this will attract buyers upon their return. Are these the only stocks out there? Certainly not - base your research on sectors before diving deeper into their components.

Where can you get this information and be alerted when conditions change?


Dr. Declan Fallon, Senior Market Technician, the free stock alerts, market alerts, and stock charts website