Sunday, 5 February 2012

Buying Time

When the market hits its low, true value investors feel that harvest time has arrived.

"The most beneficial time to be a value investor is when the market is falling," says institutional manager Seth Klarman.  There are plenty of companies ripe for the picking.

In the summer of 1973, when the stock market had plunged 20 percent in value in less than 2 months, Warren Buffett told a friend, "You know, some days I get up and I want to tap dance."

Unfortunately, this is the time when investors are feeling most beat up by the markets.  Fear and negative thinking prevail, and anyone who has faced down a bear knows how paralyzing fear can be.  This, at the depths of a bear market, is the time to buy as many stocks as are affordable.

Value bargains aren't found in strong market.  A good rule is to examine stock markets that have reacted adversely for a year or so.

Undervalued stocks quite often lie dormant for months - many months - on end.  The only way to anticipate and catch the surge is to identify the undervalued situation, then take a position, and wait.

Benjamin Graham: "Buying a neglected and therefore undervalued issue for profit generally proves a protracted and patience-trying experience."

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