Tuesday, September 16, 2008

In Times of Trouble Just Don't Over Think Everything.

We all know how troubled the market looks right now. With so much bad news dominating the headlines, it probably looks to the novice investor like the stock market is just not the safest place to put your money.

It's true that investing comes with risk and if you are not okay with that then you should not be investing. I am sure that more than a few investors have lost a tremendous amount of money this week, but there is no reason to be discouraged.

Despite what the ranting heads on CNBC and in so many financial publications may say, I will still tell you that opportunity abounds in these times. Even if things do get worse in the markets, the beauty of it all is that they will eventually get better. And that means that for investors who are sitting on the sidelines, now is the time to swoop in and pick up some cheap stocks.

The most solid advice that I can give is just don't overthink every situation when you are deciding where to put your money. Keep it simple and find a company or group of companies that have had share prices suffer in the last year or so. The biggest challenge is finding a company that won't go bankrupt and honestly even someone who just flat out guesses where to put their money will be able to find a company that won't go bankrupt since the overwhelming majority of established, traded companies will never go into bankruptcy.

If you're scared of the financial sector after the recent events (and who could blame you) then that's an easy fix: don't invest in the financial sector. The only error that you could make right now would be to not be taking advantage of the great opportunities that exist right now.

I will let you in on a few of my personal favorites, but this list is by no means all inclusive because as I said earlier, opportunity abounds.

I like Deere and Company (DE), with their signature green farm vehicles and a track record of dependability I see no reason why their share price couldn't double in value in 3-5 years after this current mess in the financial markets works itself out.

I'll grant you that this pick is a little riskier, but I like General Motors (GM) too. I don't think that I could ever envision a world where General Motors doesn't exist and I don't think the United States government would be able to either. In 2010, GM will get some of its pension weight lifted off its shoulders by the UAW and the much hyped Chevy Volt also comes out that year. The way I see it, they only need to survive until 2010 at which point I think they will be a formidable company again.

One of my absolute favorite value plays right now is the Las Vegas Sands Corporation (LVS). Granted, an economic turnaround is needed for LVS to start to see share prices soar again, but when that turnaround happens in a year or two (or more if you are such a pessimist) I know that I will really be happy to a have basis in this stock at under $40 a share. Given time LVS shares could feasibly triple or quadruple in value, especially if historical prices are any indication.

These three stocks picks are what I like right now, but I will tell you that in troubled markets like this, there are opportunities everywhere and you don't even have to look that hard for them.

The bottom line is just to keep your thinking simple right now...don't think like those on Wall Street who feel the need to nitpick at every little detail and find little flaws everywhere because all that thinking won't make you money and it will give you a headache.

Investors look for opportunity all of the time, but sometimes I think fear blinds them from seeing when opportunity is sitting right in front of their face. There are risks, but we're all aware of those risks. So, go out there and put your money to work while there is so much opportunity available.
Disclosure: author is long LVS

Happy Investing