Keep things in perspective.
The charts below illustrate that last week's action simply
brought the broad indices back a bit off nominal all-time highs
set earlier this month. When looking at the DJIA and the NASDAQ
Composite it is noteworthy that almost 100% of their 52-week
performance came from movement just since the start of this year.
IBM's greater than 10% one-week drop and Apple's regression to
under $400 dragged down the Tech Index by 4.36%.
The summer of 2012's market lows were set as expectations for
worldwide recession were being priced into shares of industrials
and materials. Buyers of those stocks last May and June ended up
big winners even though the economic conditions haven't changed
much since then.
Industry leaders like Deere (
), Cummins (
), Caterpillar (
), and Schlumberger (
) now trade nearer low points than highs, once again. Fertilizer
companies Agrium (
), Potash (
) and Mosaic (
) are similarly offered near multi-year low valuations.
If you missed making money in these by passing on them last
spring, you are now getting a second chance to put on positions
at great prices. "Buying low to sell high" requires actually
getting in when the news appears less than rosy.
It's better to buy when shares are out-of-favor. Ironically,
that's when yields are best and risk is diminished.
Any stock could go lower in the short run. World-class companies
that supply needed goods and services will always come back up
when the cycle plays out. In an environment dominated by
in-and-out trading those who take a longer-term view are more
likely to outperform.
See Market Shadows' Virtual Value portfolio and its performance
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