At one point yesterday the S&P 500 was down 13.5% for the year and nearly 20% off its all-time high set on 10/11/07. Did the index deserve the valuation it had on 10/11? Probably not. Does it deserve the valuation today? No!
When the market offers attractive valuations it is time for long-term investors to begin making a "Value List" of stocks to buy. The reason I always emphasize long-term has to do with the belief I have that most individual investors need to invest with an outlook that goes out several years. Buying in the coming days/weeks could prove to be very lucrative 12-24 months from now, but in the near-term it may be a little dicey.
For example, investors looking to enter into one of the technology darlings, Google (NASDAQ:GOOG) could buy the stock for $550, nearly $200 less than it was in November. Based on the fundamentals and the growth potential of the stock, the chance of GOOG retesting the highs in the next 24 months is good. BUT, GOOG could very easily test support near $500 before that happens. Could you handle a 10% loss in the short-term? If not, then I suggest you rethink your investment strategy or seek professional guidance from a qualified investment advisor that actually understands the market.
To try and get my point across a little more and to help you begin the construction of you "Value Watchlist", I will give you a few companies to start with.
1, 2 – Cameco Corp. (NYSE:CCJ) and BHP Billiton (NYSE:BHP): CCJ is the world's largest uranium producer that has fallen 40% from the June high. The demand for uranium will continue to increase as more nuclear power plants come online. BHP is the world's largest miner that may get even bigger in the coming months. BHP lost over one-third of its value in less than three months as investors suddenly feel global demand for iron ore and other metals will halt. This is crazy and why BHP is a great long-term play.
3, 4 – Covanta (NYSE:CVA) and Veolia Environment (VE): Both are considered "green" plays because CVA converts trash-to-energy and VE is the world's largest water company based in France. The alternative energy sector is alive and well and CVA and VE offer exposure to the sector without the high risk of the solar and niche energy plays.
5 – Wynn Resorts (NASDAQ:WYNN): Gamblers typically do not stop heading to the casino when times are tough; unfortunately some head to the casino in rough times. WYNN has the exposure to both Las Vegas and Macau and has some big potential in the coming years. The stock fell from $170 to less than $100 today, all in the matter of three months. The stock has some strong support in the $90-$100 range and could be much higher a couple of years from now.
6 – Invesco (NYSE:IVZ): I have to throw in one financial stock. IVZ is a European company that manages mutual funds and offers an array of asset management services. They also own the PowerShares family of ETFs, which I use often in my investing. The stock hit a new high in December before getting whacked with the other foreign financials. The lack of exposure to credit issues, IVZ is a nice play on support at $23.
Remember, the stocks above are merely ideas to get you started and are only for investors that have a long-term outlook.
Disclosure: My firm owns shares of BHP.