CAUSE OF THE COLLAPSE
The US stock indices hit new 18-month highs yesterday morning before falling into the closing bell. This morning stocks were lower before catching a bid and within an hour the indices were all higher. During the rally the Goldman Sachs (GS) “questioning” had already gotten underway and GS was higher by 4 points. So what was it that caused the sharp sell-off?
The S&P downgrade of Greece to “junk” status and Portugal’s downgrade by two notches sent shivers through the global investment world and trader sold first and asked questions later. Because all the major financial networks covered the Goldman trials (for lack of better words) today, the news of the debt downgrade was not the headline for most average investors.
BUY WEAKNESS or SELL AND BANK PROFITS?
The question of the day refers to whether investors should begin selling positions to lock-in profits from the 15-month bull rally? Or should this pullback be looked at as a buying opportunity?
The answer is both!
You should look to sell stocks/ETFs that have gone along for the ride with the overall market, but really are not the “best of the best”. An example may be a retailer that rose to new 1-year highs as the sector hit 2-year highs, but remains well off the all-time high set a few years ago. One stock that comes to mind (not sure why it popped in my head) is Bon-Ton Stores (BONT), a department store that has seen its stock rise from $0.76 to $18.40 yesterday. It is probably time to sell and bank any profit you have in the stock. Again, just one example.
On the other hand, there is an opportunity to use today’s weakness and any further market-wide selling to buy into stocks that remain undervalued and that have above average growth stories. Here at Penn Financial Group we are continuously searching for stocks and ETFs that meet out stringent requirements and when healthy weakness occurs we will take advantage of the lower prices and build long-term positions.
WHAT TO BUY!!
So what are we buying when the time is right and we feel the pullback is near complete? Great question.
Here is some insight into 2 stocks that we moved to the top of our list in the last week.
Stock #1 is a high-growth Chinese tech stock which benefits from the world going wireless and using more electronic devices.
Add in the fact this stock is trading with a P/E Ratio under 7 with earnings per share over $1 this year and the price per share is under $10!
Even more amazing is that this stock is trading at less than half of its fair value according to our models.
Stock #2 is consumer related. Obviously the consumer is not dead as most of the Wall Street analysts want you to believe. The retail sales number continue to impress and the S&P Retail Index hit a fresh 2 1/2-year high this week. It is NOT TOO LATE to make money in this sector.
BUT we are not recommending you buy a retailer. The stock you should buy is the maker of the clothes that you buy at the retailers.
This apparel company is a hidden gem on Wall Street that offers a combination of growth and value.
Fundamentally stock #2 is one of the most attractive ideas we have come across in weeks and will look to build our position during this pullback.
TELL ME THE NAMES OF THE 2 STOCKS!!!!!
As you know Penn Financial Group’s proprietary research is done in-house for our clients and investment service subscribers. If you would like to get the 2 names of the stocks I have mentioned tonight please email info@pennfinancialgroup.com with the following info: Name, Contact Number, Email and one of our representatives will contact you with the 2 stocks mentioned. Or you can call the office toll-free at 1-877-383-7366.
We look forward to hearing from you.
Have a great night,
Matt McCall
