- low-priced stocks
- lower NASDAQ issues
- small total capitalization issues
- thinly traded, analyst under-covered or non-covered stocks.
- fundamental in industry laggards
- stocks in recession-sensitive industries
- brokerage firms' own stocks (the public will be slow to return to active investing)
- discredited groups
- stocks in panic-trigger related groups
Because of fear, nervousness and absence speculative appetite after a crash or panic, the first 6 groups (some of which will overlap for individual stocks) lack sponsorship. In addition, because market panics generate immediate scare headlines in the media, predictably there will be talk of recession (or depression) and parallels drawn with 1929. Recall the October 1987 and October 1989 bashings and the smaller one-day drubbings during the early and middle 1990s; depression talk was rampant in post 9/11 months until mid-2002.
The final 2 categories should be off your hold list for similar reasons. Sometimes there is an industry or category of stocks related to the news that triggers the panic. Even immediately after any panic itself has passed, investors and traders will have keen memories of what started the debacle, and will avoid such stocks for an extended time. The present mid-2007 trouble with sub-prime mortgage losses drives a major drop and banks will be on the defensive thereafter, even if they look cheap.
[Cyclicals such as autos, steels, chemicals, papers and capital goods producerss are not prime early choices for participating in the bounce. Similarly, vacation-related (airline, hotel and casino) and luxury stocks fare poorly early on.]
No comments:
Post a Comment