Wait...did I just hear a Bear? Shhh.. Patience, then the Bear is our friend.
Charlie is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
As the market appears to stall out and some of my target stocks move closer to rational buy zones, I hear growling and thrashing out in those woods. I like to think of stalking fat lunkers in what used to be a crowded stream in Bear Country as my analogy for this market. It amuses me to picture some unwary fisherman angling for 3D Systems (NYSE: DDD) just as the Bear grabs his fish and maybe him to boot. I've been watching for DDD and a few other interesting stocks to enter my zone. The main thing I've learned (and relearned) about fishing in Bear Country for stocks as well as fish is PATIENCE.
Some stocks like DDD, P/E over 80 at one point and about 50 now, just get touted and speculated to the moon, and I cannot justify paying such premiums. Ah, but if I am patient, and wait for the Bear to go after DDD, maybe I can justify paying near a 20 P/E for a young and unproven company in an emerging technology. Others vulnerable to downdrafts get my attention as well, like Ebix (NASDAQ: EBIX) a recent victim of either a short attack or some risky accounting practices. I focus on what I want to accomplish: INVESTING in stable, 3% yielding low P/E stocks, or those who can grow into that realm. Patience is my elusive virtue to execute that plan. Because as popular, noisy and colorful as EBIX and DDD might be, I don't NEED to invest in them, there are other fish, er stocks that will do as well for my purpose.
I can wait for Ford (NYSE: F) to sink under Bear pressure to $12 or less at 8-9 P/E and 3.2% yield. Or, some new disenchantment or panic with Apple (NASDAQ: AAPL) to drive it under $440/sh so I can add shares at 10 P/E and 2.4 % yield, perhaps improving to 3%+ if AAPL' s cash hoard is distributed. Those sorts of buys seem more likely to me to hold up long term than gambling on stratospheric possibilities like DDD and EBIX, and with their recent radical moves, I like my chances to buy them at less than stratospheric prices, if I am simply Patient. EBIX seems especially well positioned for a patient watch and wait: detailed and specific accounting fraud allegations are waiting for a well reasoned, factual and detailed proof or defense, neither of which has yet surfaced. The fact that EBIX management did not immediately present such a defense not only looks suspicious, it drives the price in the direction I prefer, at least right now. I don't need to do the sleuthing required to prove or disprove EBIX's accounting flaws, even if I could trust my fact finding and accounting capabilities, it serves my purpose to wait....yours too, if you are a long term buyer.
DDD is a whole other universe, with fantastical growth prospects, little history, and fanatical fans. But buying at an 80 P/E with 10X growth already baked into the price? At least for me, that's a prescription for anxiety and bailing at a serious plunge, exactly the wrong time. I can tell you that had I paid $50 or $60/share before the 3/2 split, the urge to sell would have been powerful- as apparently it was for many shareholders, judging by the share volumes. No, if I can buy in the 20 P/E zone, I am pretty sure I can be patient with DDD. Closer to 30 P/E, a disaster waiting to happen. Know your "investing flaws" thats one I wish I had learned much earlier. Out-thinking the market is tough enough, out-thinking yourself is both painful and unnecessary.
SkepikI has position in Apple and Ford. The Motley Fool recommends 3D Systems, Apple, Ebix, and Ford. The Motley Fool owns shares of 3D Systems, Apple, Ebix, and Ford and has the following options: Short Jan 2014 $55 Calls on 3D Systems and Short Jan 2014 $30 Puts on 3D Systems. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!