This is the kind of market I hate to love and love to hate. I have tried so hard to pick the best-of-breed companies to invest in, yet because of weakness abroad, the market as a whole is going down. I hate this type of market because even the best stocks have been getting hammered in this correction. Even Apple (NASDAQ:AAPL), one of the best growth stories in history is back down hovering around $560 per share again, at the level that I described a couple weeks ago as "in the bargain bin". This company continues to blow earnings estimates away, yet the shares can't seem to gather any steam, moving in the opposite direction.
I also see strong companies in my portfolio like Eaton Corporation (NYSE:ETN) drop close to 10% in the last couple of weeks. This company recorded a great quarter as well, highlighting the strong electrical sales, and quality use of capital that I have come to expect from Eaton. The reason for the drop in this stock is due to its global business that depends on China (showing signs of economic weakness) and Europe (what a disaster).
Despite my hate for watching the holdings that I already have in my portfolio lose precious value, I love the opportunity that is presented. I have a pretty tough stomach when it comes to withstanding short-term losses and having discipline during downturns, so I know that when I start to worry that it is time to buy.
I can still remember the churning that was going on in my stomach in early March of 2009. I had watched my holdings sink for so long that it was making me sick. I recall the thought of selling shares crossing my mind. I wanted to lock in the losses, and save myself the agony of watching any longer. I stopped myself for a moment, and realized that if I was freaking out and ready to sell, that I was bound to be one of the last people on earth to turn bearish. I took a deep breath and starting adding to my position.
I was teaching a budgeting/investing class at the time, and I had an individual tell me that they had finally given in and sold their mutual funds and bought into a fixed income fund. They had seen their retirement principal cut in half and were done with risk. I told them that now is the time to buy! I am not sure if they ended up taking my advice or not, but if they decided to stay on the sidelines, they missed out on the bounce that has brought the Dow back from the 6500 level to where it sits now around 13,000.
There are some spectacular bargains available right now. McDonald's (NYSE:MCD) is trading around the $91 range right now. It is not only the leader in the fast food industry, but is growing well this year. Google (NASDAQ:GOOG) one of the best internet plays, is trading at around $610, despite its strong numbers in reported earlier this month, with 24% growth over the same quarter a year ago. You don't have to look hard to find a great deal on quality stocks right now, so muscle your way past the reflex to purge losses and find something to buy.