Saturday, 23 June 2012

"Be greedy when others are fearful."

The Buffett Buy Signal
You'd Be Foolish to Ignore

Warren Buffett is one of the world's most famous and successful investors. He lives by this maxim: "Be greedy when others are fearful."
Another investing legend, John Templeton, said:"The time of maximum pessimism is the best time to buy."
We could go back even further. Baron Rothschild, an 18th century British nobleman and member of the Rothschild banking family, said: "The time to buy is when there's blood in the streets."
Look around you... eurozone in crisis... top execs stuffing their bank accounts with undeserved bonuses... ordinary people angry with falling living standards and pay freezes... riots on the streets of Athens... looting and violence across London last summer.
You don't need me to tell you that 2011 was a shocker...
In the European debt storm, the markets took a battering. The FTSE 100 slumped by 10% in August to a low of 4,944 points... In November alone, £864 million poured from equity funds, the biggest outflow since 1992.
Today, for many investors, the aftermath of the storm looks grisly.
The eurozone is still in turmoil. At 3.6%, UK inflation remains painfully high12. UK Government debt stands at over £1 trillion... a whopping 66% of the total economy13... while we consumers owe around £1.5 trillion.14
No wonder many private investors won't go near the stock market...
The herd is running scared.
Earlier this year, Warren Buffett seemed to think that once again it was time to be greedy. And there was one UK blue chip in which he made a significant bet. It's the supermarket chain Tesco. Buffett first bought into this company in 2006. In January 2012, he invested another £500m10 after the company issued a profit warning, which saw the shares dive by 20%.
Tesco Chart
Tesco has taken a hit – but the likes of Warren Buffett are moving in on what could be a bargain
This is without doubt one of those periods of pessimism that gets investors like Buffett excited. And it's the mood of the crowd that's driving many share prices down to lows we think they don't deserve.
This could mean you have an opportunity to snap up some serious bargains – companies with solid fundamentals, tasty prospects for growth and ridiculously cheap share prices.

Stock Performance Chart for Tesco PLC

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