3 Reasons To Buy Into The Market Today

29 June 2012

This market is a buy. Here's why.

The stock market, it's fair to say, is in an uncertain mood. And, as in the early days of 2009, just before the market's nadir, daily items of news are having a disproportionate effect on sentiment.

The economy, Greece, banking downgrades, American purchasing and housing surveys -- you name it, and stock prices are reacting, oscillating wildly on euphoria and gloom.

At such times, it's tempting to sit it out, and wait for calmer times before putting more money into market. But that, I think, would be a mistake.

Here's why.

Pessimism abounds

Let's start with why the market is reacting to newsflow, and not shrugging it off. Simply put, investors today are far more pessimistic than they were earlier in the year, when the FTSE 100 (UKX) was within a few points of 6,000.

And pessimistic markets, in short, are buying opportunities. As Benjamin Graham put it: "Buy when most people -- including experts -- are pessimistic, and sell when they are actively optimistic." Or, to cite that other well-known super-investor, Warren Buffett: "Be fearful when others are greedy, and be greedy when others are fearful."

Can the market get more pessimistic still? Undoubtedly. Can people get even more fearful? Of course. But with the market down 10-15%, you can buy today the same shares that you were buying just weeks ago -- but significantly more cheaply.

And as Warren Buffett -- again! -- so memorably put it in a thoughtful article in Fortune magazine a few years back:

"When hamburgers go down in price, we sing the Hallelujah Chorus in the Buffett household. When hamburgers go up, we weep. For most people, it's the same way with everything in life they will be buying ‑‑ except stocks. When stocks go down and you can get more for your money, people don't like them any more."

And unquestionably, the stock market's hamburgers have just gone down in price. AstraZeneca (LSE: AZN), Aviva (LSE: AV), BT (LSE: BT-A), BAE Systems (LSE: BA), Barclays (LSE: BARC) andLloyds Banking Group (LSE: LLOY) -- undeniably, Britain's blue chips have gone on sale.

That said, only some of those particular blue chips are rated as a 'buy' by Neil Woodford, the subject of a recent special free Motley Fool report: "8 Shares Held By Britain's Super Investor". And others in that short list above, it's fair to say, he wouldn't touch at all.

Which are which? Why not download the report, and find out? As I say, it's free.

Asset class perspective

That said, it's possible to view today's market in a very different light. Namely, this way: if you don't like shares at today's prices, what do you like?

Cash? Real returns are either negative or zero -- and the next move in interest rates is likely to be downwards. Property? You're braver than I am. Gilts? Every bubble has to burst one day -- and we're surely in a gilt bubble. And so on.

On the other hand, decent blue chips are on yields of 5% or so, delivering dividend growth of 5-10%, and offer capital growth into the bargain.

And, what's more, at very reasonable prices. The FTSE 100's price-to-earnings (P/E) ratio yesterday was 9.88, compared to 10 years ago when it was 19.88 -- and that, in short, is one helluva difference in valuation.

Watch-list wonders

Frankly, there's not much point in having a watch list if all you do is, well, watch it.

Or, to put it another way: "When shares on my watch list scream 'bargain', I buy them. What do youdo, Sir?," as master investor and economist John Maynard Keynes so memorably didn't quite say.

And with those sentiments in mind, there's one share in particular that I've been loading up on in recent times, having almost doubled my holding this year. What's more, I'll be buying still more of it in mid-July, when I've banked my dividends from Sainsbury (LSE: SBRY), Marks & Spencer (LSE: MKS),GlaxoSmithKline (LSE: GSK) and BP (LSE: BP), and found some more spare cash.

Its name? You can find that out in another free special report from the Motley Fool -- "The One UK Share Warren Buffett Loves". But from the way that Buffett has seemingly been topping up himself in recent times, it's clear that the share is on his watch list, too. The report is free, so why not download a copy now?

Your view?

Of course, not everyone will agree with me. Some of you, as you've explained before, in comments appended to articles like this, are rather keener on property than I am.

But with the FTSE 100 on a P/E below 10, real interest rates largely negative and a wobbly housing market, that's the world as I see it. Comments?


http://www.fool.co.uk/news/investing/2012/06/29/3-reasons-to-buy-into-the-market-today.aspx

Efficient Market Hypothesis: Fact Or Fiction?

Published in Investing on 5 January 2012

Our economics series looks at the question of whether we really can beat the market.

How many times have you heard a would-be private investor saying something like: "You can't beat the game, because the big institutions always get the information ahead of you and get in first"?

If you believe that, you might be a proponent of the Efficient Market Hypothesis, which says that because the financial world is efficient in terms of information, it is impossible to consistently beat the market based on what you know when you choose where to put your money.

The idea was first developed by the economist Eugene Fama in the 1960s, following on from his observations that the day-to-day movements of the stock market resemble a random walk as much as anything else. And for a while, it came to be pretty much accepted as fact.

On the face of it, it does seem reasonable. Given that everyone has access to the same information, and there is a truly free price-setting equilibrium in which the balance of supply and demand is the determining factor in setting share prices (as it pretty much is with any free-traded commodity), surely the price will reflect all of the information available at the time, and you can't beat the market.

Fine in the short term

In the short term, the idea seems pretty much spot-on. New results are released and they look good, and you try to get in 'ahead of the market' to profit from them? Well, no matter how quick you are, it's too late and the price has already jumped. That's really no surprise, because the sellers of the shares have the same new information too, and the equilibrium point between supply and demand will instantly change.

But in the longer term, the Efficient Market Hypothesis is widely considered to be flawed. In fact, if you believed it held true over serious investing timescales, you probably wouldn't be reading this -- you'd have all your investing cash in a tracker fund and you'd be spending your spare time doing something else. (And that's actually not a bad idea at all, but it's perhaps something for another day).

There is plenty of empirical evidence that the market is what Paul Samuelson described as "micro-efficient" but "macro-inefficient", such that it holds true for individual prices over the short term but fails to explain longer-term whole-market movements.

Long term? Hmm!

And there are others, including the noted contrarian investor David Dreman, who argue that this "micro efficiency" is no efficiency at all, claiming instead that short-term response to news is not what investors should be interested in, but the longer-term picture for a company. It's pretty clear which side of that argument Foolish investors will come down on.

So why doesn't it work in the long run, and how is it possible to beat the market even in the presence of the ubiquity of news and an instantly adjusting price mechanism? Well, the major flaw is that the theory assumes that all participants in the market will act rationally, and that the price of a share will always reflect a truly objective assessment of its real value. Or at least that the balance of opinion at any one time will even out to provide an aggregate rational valuation.

It doesn't take a trained economist to realise what nonsense that can be. Any armchair observer who watched supposedly rational investors push internet shares up to insane valuations during the tech share boom around the year 2000 saw just how the madness of crowds can easily overcome calm rationality.

And the same is true of the recent credit crunch, when panicking investors climbed aboard the 'sell, sell, sell' bandwagon, pushing prices for many a good company down to seriously undervalued levels. What happens is that human emotion just about always outstrips rationality -- good things are seen as much better than they really are, and bad things much worse.

Irrational expectations

And it's not just these periods of insanity, either. There is, for example, strong evidence that shares with a low price-to-earnings ratio, low price-to-cash-flow ratio and so on, tend to outperform the market in the long run. And high-expectation growth shares are regularly afforded irrationally high valuations, and end up reverting to the norm and failing to outperform in the long term.

So what does that all say about the Efficient Market Hypothesis? Well, it certainly contributes to understanding how markets work, but we also need to include emotion, cognitive bias, short-term horizons and all sorts of other human failings in the overall equation.

And that means we can beat the market average in the long term, if we stick to objective valuation measures, don't let short-term excitements and panics sway us, and rein in our usual human over-optimism and over-pessimism.

http://www.fool.co.uk/news/investing/2012/01/05/efficient-market-hypothesis-fact-or-fiction.aspx

Lessons from the '87 Crash

SPECIAL REPORT October 11, 2007

Lessons from the '87 Crash

Enjoying the Dow's record run? Don't get too comfy. The market's Black Monday breakdown is a reminder of how quickly investor sentiment can turn

by Ben Steverman

As major stock indexes hit all-time highs, it's worth looking back 20 years to a far gloomier time, when investors were cruelly and suddenly reminded that the value of their investments can depend on something as unpredictable as a mood swing.

Every once in a while, fear, snowballing into panic, sweeps financial markets—the stock market crash of October, 1987, now celebrating its 20th birthday, is a prime example.

In the five trading sessions from Oct. 13 to Oct. 19, 1987, the Dow Jones industrial average lost a third of its value and about $1 trillion of U.S. stock market value was wiped out. The losses culminated in a panic-stricken 22.6% decline in the Dow on Black Monday, Oct. 19. The traumatic drop raised recession fears and had some preparing for another Great Depression.

Stock market crashes were nothing new in 1987, but previous financial crises—in 1929, for example—often reflected fundamental problems in the U.S. economy.

MYSTERIOUS MELTDOWN
The market's nervous breakdown in 1987 is much harder to explain. Especially in light of what came next: After a couple months of gyrations, the markets started bouncing back. The broad Standard & Poor's 500-stock index ended 1987 with a modest 2.59% gain. And in less than two years, stocks had returned to their pre-crash, summer of 1987 heights.

More importantly for most Americans, the U.S. economy kept humming along. Corporate profits barely flinched.

To this day, no one really knows for sure why the markets chose Oct. 19 to crash. Finance Professor Paolo Pasquariello of the University of Michigan's Ross School of Business says the mystery behind 1987 prompted scholars to come up with new ways of studying financial crises. Instead of just focusing on economic fundamentals, they put more attention on the "market microstructure," the ways people trade and the process by which the market forms asset prices.

True, in hindsight there are plenty of adequate reasons for the '87 crash. Stocks had soared through much of 1987, hitting perhaps unsustainable levels: In historical terms, stock prices were way ahead of corporate profits. New trading technology and unproven investing strategies put strain on the market. There were worries about the economic impact of tensions in the Persian Gulf and bills being considered in Congress.

OUT OF SORTS
But for whatever reason, the mood on Wall Street shifted suddenly, and everyone tried to sell stocks at once. "Something just clicked," says Chris Lamoureux, finance professor at the University of Arizona. "It would be like a whole crowded theater trying to get out of one exit door."

It's a fairly common phenomenon on financial markets. Every stock transaction needs a buyer or a seller. When news or a mood shift causes a shortage of either buyers or sellers in the market, stock prices can surge or plunge quickly. Most of the time, balance is quickly restored. Lower prices draw in new buyers looking for a bargain, for example.

Sometimes, as in 1987 and many other true crises, things get out of hand. What happens at these moments is a mystery that may be best explained by dynamics deep within human nature.

Usually, explains behavioral finance expert Hersh Shefrin, a professor at Santa Clara University, investors believe they understand the world. In a crisis, "something dramatically different happens and we lose our confidence," Shefrin says. "Panic is basically a loss of self-control. Fear takes over."

BUYERS AND SELLERS
Why don't smart investors, seeing others panic and sell stocks, step in to buy them up at a bargain?

First, it's very hard, in the midst of a crisis, to tell whether markets are acting rationally or irrationally. Buyers refused to enter credit markets this summer on fears about risky mortgage debt. It will take months, maybe years, to add up the full impact of losses on subprime loans.

It's also tough to think rationally yourself. "It's hard to keep your emotions in check when your money is on the line," Shefrin says.

And, even if you're confident the panicked market is giving you a buying opportunity, you're likely to want to wait until it hits bottom. If a market is in free fall, buying stocks on the way down is likely to give you instant losses.

Not only will buyers hold back. A falling market will bring many more sellers out of the woodwork. Leverage is one reason: Many investors buy stocks on borrowed money, so they can't afford to lose as much without facing bankruptcy.

This is one explanation for the temporary, sharp drops in many financial markets in the summer of 2007. Losses on leveraged mortgage debt prompted many hedge funds to dump all sorts of assets to raise cash.

THERAPY FOR A PANICKED MARKET
The solution to a panicked market, many say, is slowing down the herd of frightened investors all running in the same direction. New stock market rules instituted since 1987 pause trading after big losses. For example, U.S. securities markets institute trading halts when stock losses reach 10% in any trading session. "If you give people enough time, maybe they will figure out nothing fundamental is going on," University of Michigan's Pasquariello says.

There's another form of therapy for overly emotional markets: information. In 1929 and during other early financial crises, there were no computer systems, economic data were scarce, and corporate financial reporting was suspect. "The only thing people knew in the 1920s was there was a panic and everybody was selling," says Reena Aggarwal, finance professor at Georgetown University. "There was far less information available." In 1987, and even more today, investors had places to get more solid data on the market and the economy, giving them more courage not to follow the herd. That's one reason markets found it so easy to shrug off the effects of 1987, Aggarwal adds.

You can slow markets down, reform trading rules, and tap into extra information, but financial panics may never go away. It seems to be part of our collective human nature to occasionally reassess a situation, panic, and then all act at once.

Many see the markets as a precarious balance between fear and greed. Or, alternatively, irrational exuberance and unwarranted pessimism. "All you need is a shift in mass that's just big enough to push you toward the tipping point," Shefrin says.

IN FOR THE LONG HAUL
What should an individual investor do in the event of a financial crisis? If you're really sure that something fundamental has changed and the economy is heading toward recession or even another depression, it's probably in your interest to sell. But most experts advise waiting and doing nothing. "In volatile times, it is very likely that you [will be] the goat that other people are taking advantage of," University of Arizona's Lamoureux says. "It's often a very dangerous time to be trading."

Shefrin adds: "The chances of you doing the right thing are low." Don't think short-term, he says, and remind yourself of the long-term averages. For example, in any given year, stock markets have a two in three chance of moving higher. Other than that, it's nearly impossible to predict the future.

So, another financial panic may be inevitable. But relax: There's probably nothing you can do about it anyway. Anything you do might make your situation worse. So the best advice may be to send flowers to your stressed-out stockbroker, stick with your long-term investment strategy, and sit back and watch the market's roller-coaster ride.

Steverman is a reporter for BusinessWeek's Investing channel .

http://www.businessweek.com/investing/content/oct2007/pi20071011_494930.htm

Market Behaviour: Can You Beat the Market?

The best answer to this question is, sometimes - but don't count on it.

Generally, the market does a pretty good job of pricing stocks, but when the crowd is acting irrationally, you can find your best and worst buys.

Don't try to beat the market.  

Instead, focus on building the best portfolio you can.  

Buy stocks when they're cheap and sell them when they recover.  

Do not worry about missing the highest highs because you rarely can sell at just the right time to avoid the steep drop-off when the price of a stock plummets.

MOST PEOPLE GET CAUGHT UP IN THE EMOTIONAL HIGHS THEY FEEL AS STOCKS CLIMB AND DON'T ACT TO TAKE PROFITS BEFORE IT'S TOO LATE.  DON'T GET CAUGHT UP IN THAT TYPE OF BEHAVIOUR.

Related topics:

Market Behaviour: The Least You Need to Know
Market Behaviour: Crowd Impacts on Stock Prices

Market Behaviour: Can You Beat the Market?
Market Behaviour: Bull Runs
Market Behaviour: Bear Stalls
Market Behaviour: Pendulum Swings (Volatility)
Market Behaviour: Irrational Exuberance
Market Behaviour: Unjustifiable Pessimism
Market Behaviour: Control Yourself (Patience)

Insights into Irrational Minds and Markets

http://www.centaur.co.za/investment_methodology/index.html

Curb irrational behaviour: Be aware of ANCHORING, a common mind trap when investing.

Curb irrational behaviour

Annette Sampson
April 7, 2010

The strategy To avoid common mind traps when investing.

You're talking about fear and greed, right? There's no doubt fear and greed are behind a lot of investor behaviour - much of it is irrational. But a school of study, known as "behavioural finance", has demonstrated our minds are hard-wired to react in certain ways. Even if we make concerted efforts to avoid fear and greed, our thought patterns may lead us to make investment decisions that could prove costly.


Such as? There are many aspects to behavioural finance but one area Tyndall Investment Management's Australian equities team believes may be influencing investor behaviour at the moment is "anchoring".  In simple terms, this is the tendency we have to base our judgment on a piece of initial information then stick with it even if other information becomes available.

To show how it works, Tyndall looked at research by two behavioural finance experts, Amos Tversky and Daniel Kahneman. They asked two groups of people what percentage of the United Nations comprised African countries. 

• The first group was asked whether it was above or below 10 per cent; 
• the second whether it was above or below 65 per cent. 

The numbers were supposedly chosen randomly (the groups didn't know the "random" spin of the wheel was rigged) but it still influenced their estimates.

• The first group, having a lower "random" figure estimated an average 25 per cent of African countries; 
• the second 45 per cent.

In the absence of real information, the test groups tended to "anchor" their estimates on any information available rather than thinking independently.

In another study, psychologist Ward Edwards asked people to imagine 100 bags of poker chips. Each bag contained 1000 chips but 45 contained 700 black chips and 300 red while 55 contained 300 black and 700 red.

• When asked what the probability was of selecting a bag with mostly black chips, most of the test subjects got it right. 
• The answer was 45 per cent.

But he then asked them to imagine 12 chips were randomly selected from the bag - eight black and four red. The chips were put back and the respondents were asked whether they would change their first answer in response to the new information.

• Many said the probability of the bag containing mostly black chips was unchanged at 45 per cent. 
• Most said the likelihood was less than 75 per cent. 
• But calculated mathematically, the bag was 96.04 per cent likely to contain mostly black chips. 
• The respondents didn't take account of the new information.

But how does that relate to my reactions to investment markets? Tyndall says the same research has been conducted on analysts' reactions to company earnings announcements.

• They often don't revise their estimates enough when they receive new information, resulting in a string of earnings "surprises". 
• It says the recent rally has resulted in largely favourable earnings forecasts but if the numbers don't live up to expectations and investors haven't factored in changing circumstances to their thinking, the market could fall sharply.

It says basing future investment performance on past returns is another common example of anchoring.

• After shares fell more than 38 per cent in 2008, most investors expected a dud 2009. 
• Certainly no one was predicting a rise of 37 per cent. Investors who switched money out of shares paid dearly.

So how do I avoid this trap?

• Understanding these behaviours and being aware of them can help you make more informed and rational decisions. 
• Even better, Tyndall says, it can give you an edge, allowing you to identify, and make money from, mispricing opportunities that come about because of other people's irrational behaviour.

Old favourites, such as having a diversified portfolio, getting good professional help and looking to the long term can help.

http://www.smh.com.au/news/business/money/investment/curb-irrational-behaviour/2010/04/06/1270374188426.html?page=fullpage#contentSwap1

We should try to make sure we're not in the pessimist camp

Your Pessmism Is Holding You Back


By Selena Maranjian

September 23, 2009


Surveys and studies can shed a lot of light on news that's important to our lives. I've reported on many of them, such as the Employee Benefit Research Institute's findings that we may not retire when we think we will. There's the annual Retirement Confidence Survey, showing us why we stand a good chance of ending up with a gruesome retirement. And there's the report from Fidelity that can help us see how we're doing compared to others in our retirement planning.



Now there's another study out from Fidelity, with even more data on retirement and investing. Looking over the report, which happened to focus on pessimists and optimists, I learned that (drumroll, please):



•Pessimistic investors are less likely to expect a comfortable retirement than optimistic investors, by a 61% to 83% count

•Pessimists typically take on less investing risk. That's been especially true during the current uncertainties in the financial markets.

There's more. Among married couples, 61% of pessimistic spouses don't have much confidence in their ability to take over control of the household finances, versus just 39% of optimists.



The scoop

Yes, I know, the study is telling us that pessimists are kind of … pessimistic. But there's more to the study than just disposition. For instance, nearly twice as many optimists as pessimists have a detailed plan for how they'll generate retirement income. That lack of planning certainly suggests that those pessimists have good reason to expect the worst.



Given those results, we should try to make sure we're not in the pessimist camp. More often than optimists, pessimists seem to invest mainly to preserve the value of their investments -- in other words, rather conservatively. That's not a great way for most of us to build a nest egg for tomorrow, especially if you still have awhile to go before you plan to retire.



It will take a long time to build the wealth you need for retirement if you focus only on preserving your wealth rather than growing it. You'll be stuck with low returns that may not even keep up with inflation, let alone help you increase your purchasing power after you retire. If you expect to need $50,000 to cover your annual expenses, for instance, you need to build a nest egg of $1 million or more. You probably can't get there sticking with ultrasafe investments.



What to do

If you're starting to break out in a sweat as you imagine putting lots of your dollars into stocks you don't know well -- ones that might suddenly implode -- relax and take a deep breath. You can aim for solid returns with stocks that won't strike you as all that risky. Check out the following companies with top ratings from our Motley Fool CAPS investor community:



Company

Return on Equity

Price-to-Earnings Ratio

10-Year Average Return



BP (NYSE: BP)

12%

15

4.0%



Canadian National Railway (NYSE: CNI)

18%

13

19.9%



Abbott Labs (NYSE: ABT)

27%

14

4.5%



Transocean (NYSE: RIG)

22%

7

10.6%



Petroleo Brasileiro (NYSE: PBR)

31%

10

27.1%*



Schlumberger (NYSE: SLB)

24%

17

10.1%



ExxonMobil (NYSE: XOM)

27%

11

8.8%



S&P 500

(0.2%)





Data: Motley Fool CAPS; Yahoo! Finance. *Over the past nine years.





Their relatively low P/E ratios suggest that they aren't wildly overpriced, and thus these stocks offer some margin of safety. You can find plenty of compelling familiar names these days, too -- ones that offer generous dividends.



So don't be such a pessimist! Over long periods, the stock market tends to make people wealthier. Feel free to feel optimistic that now, during a recession, is often the best time to invest.


http://www.fool.com/retirement/general/2009/09/23/your-pessmism-is-holding-you-back.aspx

A Bout of Irrational Pessimism?

NOVEMBER 17, 2008, 1:54 P.M. ET
A Bout of Irrational Pessimism?

Fund manager Marty Whitman says investor panic – and not declining businesses – have sunk current market valuations. Is he right?

By BRETT ARENDS

Legendary fund manager Marty Whitman is pinning the blame squarely on an "irrational" stock market meltdown for this year's hefty losses at his Third Avenue Value fund.

"As far as we are concerned," Mr. Whitman declares in his latest shareholder letter to investors, "the fund's poor 2008 performance is attributable to an irrational stock market, not any fundamental deterioration in the businesses in which [Third Avenue Funds] has invested."
It's a pretty bold claim, in the face of a 50% loss over the past year. But is it wrong?

What triumphant bears are apt to forget is that a stock market which is capable of "irrational exuberance" - and the jury on this is surely now in - is just as capable of irrational panic, worry and gloom.

If stock market valuations were wrong when they were soaring last year, who is to say that they are correct now?

Mr. Whitman's colleague Curtis Jensen, co-chief investment manager at Third Avenue, reinforced the view in an interview last week.

Some current valuations, Mr. Jensen said, are "ridiculous" and anticipate virtual "armageddon."

Mr. Whitman and Mr. Jensen see some of the best opportunities in high-yield bonds. "There are unprecedented opportunities in the distressed debt market," Mr. Jensen said. "You are able to buy very senior securities today (offering) equity-like returns." That means bonds backed by collateral or strong covenants, with priority claims in the event of insolvency, that in some cases still offer likely yields to maturity "in the high teens" or higher, in Mr. Jensen's view.

Examples include certain bonds issued by General Motors Acceptance Corp and by the trucking company Swift Transportation. Mr. Jensen's Third Avenue Small Cap Value bought the Swift bonds at about 60% of par value, and he expects either a yield to maturity of 19% -- or a valuable slice of equity in the firm if Swift is forced into a financial restructuring.

The last time Third Avenue saw such opportunities was in the early 1990s, he adds.

Mr. Whitman, writing to shareholders, said some of the distressed loans bought recently might offer yields to maturity as high as 54%

Third Avenue disclosures show that in the past few months the firm's funds have been aggressively buying certain bonds issued by General Motors Acceptance Corp., among others. Mr. Jensen, in his Third Avenue Small Cap Value, has bought IOUs issued by the trucking company Swift Transportation at about 60% of par value. He expects a yield to maturity of 19% -- or a valuable slice of equity in the firm if it is forced into a financial restructuring.

By contrast to this "off-piste" skiing in the debt markets, Third Avenue is sticking to the gentlest runs in the matter of equities. Managers are looking for cash generators with solid balance sheets that won't need to tap the markets for extra cash any time soon. No one knows how or when this market will turn. The indices may languish for years. But bottom-up value managers, like those at Third Avenue, claim they're now seeing the best opportunities in generations.

Marty Whitman, for his part, has been through market panics for over 50 years. In his letter, he argues "today the opportunity of a lifetime seems to be present for passive investors who follow a few simple caveats." Among Mr. Whitman's caveats: Be a buy and hold investor; avoid investing with borrowed funds; and avoid shares of any companies which need, in his words, "relatively continual access to capital markets if they are to remain going concerns." Acconding to Mr. Whitman, those companies include financials such as Goldman Sachs and even companies like General Electric. "Deep value and high quality alone are not sufficient conditions for investing in common stocks," writes Mr. Whitman. "Deep value pricing and high quality assets must be accompanied by creditworthiness."

Write to Brett Arends at brett.arends@wsj.com

http://online.wsj.com/article/SB122692731966133143.html