### Attractive Buying Opportunities arise through a Variety of Causes

Attractive buying opportunities for the enterprising investor arise through a variety of causes.

The standard or recurrent reasons are
(a) a low level of the general market and
(b) the carrying to an extreme of popular disfavor toward individual issues.

Sometimes, but much more rarely, we have the failure of the market to respond to an important improvement in the company's affairs and in the value of its stock.

Frequently, we find a discrepancy between price and value which arises from the public's failure to realise the true situation of a company - this in turn being due to some complicated aspects of accounting or corporate relationships.


It is the function of competent security analysis to unravel such complexities and to bring the true facts and values to light.


Benjamin Graham
Intelligent Investor


Summary:
Attractive buying opportunities (discrepancy between price and value) due to various causes:
1.  low level of the general market
2.  extreme of popular disfavour towards individual stocks
3.  failure of market to respond to improvement in the company
4.  failure to realise hidden value in the company due to some complicated aspects of accounting or corporate relationships

“Investing is simple but not easy.”

Investors should follow the Munster family to profit from the credit crisis

By Ian Cowie Your Money Last updated: December 1st, 2011

Investors should be like the Munster family. Just as the latter only went to the beach when it was raining, the former can take perverse pleasure in more bad news about the economy – such as the official announcement that Britain has entered a second credit crisis.

Why? Because stock markets are in business to discount the future; not act as a means of recording the present or the past.

Obviously, the credit crunch is very bad news for thousands of people who will lose their jobs and homes before the economic cycle turns up again – as it will, unless this really is the end of the world. But, much less obviously, the current crisis also presents opportunities for people who remain in work and do not need to spend everything they earn.

If that sounds somewhat hypothetical, then bear in mind what has happened since I made similar points in an article that appeared in last Saturday’s newspaper under the headline: ‘Why not buy before share prices rise?’

That piece was written on Thursday last week as the FTSE 100 index closed at 5127. As I write this, it’s trading at 5541 or 414 points higher.That’s an increase of just over 8pc in one week.

You may very well say that paper gains are neither her nor there and, as a long-term investor, I would agree. But they are better than starting with a loss – and 8pc is more than most deposit accounts will pay in two years at current interest rates.

Here’s what that article said: “After the FTSE 100 index of Britain’s biggest shares suffered its longest losing streak in nearly nine years, it might be profitable to remember that the best time to invest is when you least feel like doing so.

That is the counter-intuitive message of the graph on this page, which shows how most investors do the exact opposite. They chase shares and equity-based funds when stock markets are expensive and shun them when they are cheap.

They buy with both hands at the top of the cycle and then sell out at the bottom. Needless to say, that is also the exact opposite of the way to make a profit; which is to buy low and sell high.

It ain’t rocket science but it isn’t easy to put into practice either. Humans are herd animals and it is difficult to buy when everyone else seems to be selling, even if you suspect that predictions of the end of the world will prove exaggerated, as they always have done in the past.

Or, as the multi-billionaire Warren Buffett puts it: “Investing is simple but not easy.” Tom Stevenson, a director of Fidelity Investments – and late of this parish – blames the media: “People seem to react to the overall market mood, particularly as expressed in the media. When the market is moving higher, the headlines are positive and this results in positive net sales.

And vice versa. During the 1999-2000 technology bubble, retail investors were sucked into the market in vast numbers when share price rises went exponential in the final throes of the mania.”

Many of today’s worldly-wise media bears were raging bulls back then. Now some of the shrewdest stock pickers in the world say the pessimists of today are as wrong as they were a decade or more ago when they were optimistic about the outlook. More specifically, Mr Buffett has become one of the biggest shareholders in IBM after a lifetime of avoiding technology shares.

At the risk of moving from the sublime to the ridiculous, this came as particularly good news to your humble correspondent because I had picked up some technology shares for my self invested personal pension (Sipp) in August. Back then, the FTSE 100 had fallen by 15pc in a fortnight and it seemed like a good opportunity to buy into an investment trust I had been following for more than a year.

So I bought some Polar Capital Technology shares at 301p and – even though the FTSE has fallen by more than 7pc in the last month – Polar Technology was trading around 325p this week. Of course, I have no idea where these shares or the FTSE will be next week or next year – but I have no intention of cashing in my Sipp next week or next year.”

Now, as then, that remains true. But, as mentioned earlier, it is better to start with a gain than a loss. Polar Capital Technology is currently trading at 329p, which is good news for my pension in a week of bad news for most people’s retirement plans.

Many may consider it in the worst possible taste to say such things and to refuse to join in the chorus of doom and gloom. But I think it’s more interesting to take an opposing view; even on something as serious as the credit crisis. And, as the facts above demonstrate, it can be more profitable too.

http://blogs.telegraph.co.uk/finance/ianmcowie/100013550/investors-should-follow-the-munster-family-to-profit-from-the-credit-crisis/

Opportunities amid the carnage

Nathan Bell

August 8, 2011 - 12:00PM

Warren Buffett famously said, 'be greedy when others are fearful'. That's easier said than done. With the market falling 10 per cent over the past week, 'being greedy' might be the last thing on your mind.

It shouldn't be.

Cast your mind back to March 2009. When everyone was panicking back then some of the best buying opportunities in years arose amongst the turmoil.

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A flood of disappointing news has panicked investors but this sell-off is offering some equally good bargains.

The US is slipping back toward recession, Europe is following, aided by sovereign debt fears and there are genuine concerns that Chinese demand won't keep Australia's economy bubbling along.

The health of the global economy is at risk but this time, governments' ability to manage spiralling deficits and cut interest rates is greatly reduced.

While the problems are real - governments do need to rein in spending and the economy isn't recovering as hoped - in many cases share prices already reflect the bad news.

Over the past 18 months we've been advising investors to increase their cash holdings. Now is the time to deploy some of it (but not all; we may well get more opportunities down the track).

The question is where?

Avoidance strategy

Firstly, we're steering clear of the big four banks. If the economy really falters, they will be hit hard.

Better to focus on best-of-breed companies with excellent defensive qualities: stocks like CSL, QBE Insurance, Sonic Healthcare and Woolworths, all now attractively priced (although our recommendations on them differ).

For the more aggressive, less conservative investor, real value is starting to emerge in those sectors most exposed to financial markets. Macquarie Group, a very different business to what it was two years ago, currently yields 7.8 per cent after falling 21 per cent over the past fortnight.

Computershare (down 12 per cent over the past week) and some of the funds management businesses like Perpetual (down 45 per cent since October 2010) and Platinum Asset Management (down 10 per cent over the past two weeks) are also on our shopping list, as is News Corporation, already suffering from corporate scandal but plummeting a further 8 per cent over the past week.

Don't speculate

This is a challenging environment for all investors and, despite the abundance of opportunities, it's no time to be cavalier.

If you're a conservative investor, ignore speculative situations altogether. There is less reward and far more risk in buying cyclicals and speculative companies right now.

In contrast, best-of-breed companies, many of which sport attractive prices and have already found a place on our buy list, offer defensive qualities and a far gentler ride.

This is no time to be riding bareback but for the first time in a few years, I'm getting quite excited by the value on offer.

This article contains general investment advice only (under AFSL 282288).

Nathan Bell is research director of The Intelligent Investor.

For more Intelligent Investor articles click here.

Read more: http://www.brisbanetimes.com.au/business/opportunities-amid-the-carnage-20110808-1iifz.html#ixzz1URvebbzr

Investment Opportunities in Times of Financial Crisis

Investment Opportunities in Times of Financial Crisis

It looks like the stock market is not the favorite place for anyone these days. Every day brings another disturbing news or commentary. Another stock tanked. Another bank failed. And so on.

The financial marketplace is now marked with extreme volatility and investments resemble quite a lot lottery tickets - unpredictable and surprising rallies in the value of stocks and bonds are followed by sudden significant drops. No wonder that so many investors sell up and run away from the stock market, which only worsens the situation and further pushes the stock market down.

So why should you be the one to go against the current? Is it wise to invest in stocks right now?

Actually, it is. Now that everyone else is selling it is one of the best times to invest in stocks.

"Be Greedy When Others Are Fearful"
Remember that famous Warren Buffet's quote?

"We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful."

Right now fear has seized the stock market and to many investors it seems like it is the end of the world now. However, it is not. The economy and the market will recover even if it takes longer than expected. Thus, what you can do in times of crisis like the current one is take advantage of the attractive prices and fearful environment.

Of course, this does not mean that you should invest in companies with bad outlook. Before you make a major, long-term investment, do your homework and find companies with strong and experienced management teams, good track records of profitability and growth, and innovative R&D.

You may not find extraordinary bargains but there are certainly some nice bargains for patient investors committed to gains over the long term. There are many companies that the general market has dragged down to very low prices despite their great product lines.

Invest Based on Your Objectives and Age
Do not forget that both your age and objectives should play role when you are choosing your investments.

If you are young, far from your retirement years, you can afford a little bit bigger risk. Surely, it is painful to watch your investments drop significantly. And it is very easy to give in to the fear when a stock in your portfolio drops 50%. But fear is not a good guide to decision making. While sudden financial losses may be indeed indicators that even worse drops in value lie ahead, they can just as easily be followed by an upswing.

Selling now and moving to safer investments (such as US treasuries) that will provide only 2 or 3% rate of return will not get you to your goals and will certainly take you too much time to even get back to where you were before the market went down.

On the other hand, if you are near your retirement you should choose more stable and safer investments. First, you might never be able to recover from a significant drop since you have much shorter timeframe to work with. Second, since you are going to need your money sooner, you may be forced to sell your assets at their lows.

Conclusion:

Surely the current financial/credit/housing crisis caused tremendous losses and sent many investors "racing" for the exits. Yet, remember, when the real estate and the stock market are going down, this is still equal to both crisis and opportunity.

http://www.stock-market-investors.com/stock-market-advices-and-tips/investment-opportunities-in-times-of-financial-crisis.html

Opportunities in a crisis: Lessons from the past

In any crisis, there are also opportunities.  Here is an article of lessons from the past.



UK buy-out market starting to reflect increasing market uncertainties
16 Oct 2001.
Source: AltAssets.

Conditions in the UK buy-out market are beginning to reflect the increasing uncertainty in financial markets since the global economic downturn was given extra impetus by last month's terrorist attacks on the US, according to the latest research from Royal Bank Private Equity and Unquote UK Watch.


Both the number and the value of deals in the £10m-plus buy-out market dipped significantly in September. Deal value fell to £21.3bn in the twelve months to the end of September, compared with a nine-year high of £23.5bn in late summer. The number of deals fell from a high of 155 in May and June to 132 in September.

Price/earnings ratios also showed a declining trend and are now at levels not seen since 1996. They are currently at just below 11, compared with more than 12 or 13 for most of the past five years.

Mark Nicholls, managing director of Royal Bank Private Equity, said: ‘The decline in the number of deals and downward trend in p/e ratios revealed by the UK Watch statistics confirms the trend we have seen in the market over the last six months when growing uncertainties had already made their mark on the valuations that private equity players are putting on target companies.'

He said the situation appeared to have deteriorated since the middle of September but insisted business had not ground to a halt and there was still some activity.

‘In spite of an unpredictable economic situation, deals are still being looked at and investments made; there will continue to be companies seeking to dispose of non-core businesses and investors who see growth opportunities in them,' Nicholls said.

Copyright © 2001 AltAssets

http://www.altassets.net/private-equity-news/by-region/europe/article/nz332.html

Stock market: opportunity of a lifetime or priced for a depression?

Stock market: opportunity of a lifetime or priced for a depression?

By James Bartholomew
Published: 10:45AM GMT 09 Mar 2009

These are the two messages investors are hearing simultaneously these days: the first is: "Watch out! The recession is getting to look more like a depression. Safety first. Avoid shares and anything with the slightest risk."

The second is: "Shares are ridiculously cheap. This is the opportunity of a lifetime. Do you want to look back at this time and reflect that you funked it? Buy now!"

So investors are pulled one way and then the other. Let us not pretend it is easy. If possible, one wants to have one's cake and eat it – to finesse the problem by having exposure to shares but, at the same time, owning ones that might hold up even if things worsen.


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The trouble is, lots of people are trying to do the same, so anything that looks pretty safe gets a much higher rating than companies that could get into trouble.

The safest ones are often in sectors where it will take a lot to destroy demand. People are always going to want to eat, and will probably want to drink, too. We are going for "the bare necessities of life".

Fortunately, the stock market is so low that, even among such safer companies, shares are clearly good value for the long term. It would be easy to make a little portfolio of relatively reliable companies with modest, but perhaps sustainable, dividend yields. It could include Associated British Foods at 622p on a prospective yield of 3.3pc, British Sky Broadcasting at 452p on a yield of 3.9pc and, say, Tesco at 310p on a yield of 3.7pc.

I prefer to go for smaller companies where I believe share prices are cheaper and potential gains bigger. I have been buying back into REA Holdings, which has a palm oil plantation. Palm oil is used, among other things, as a basic foodstuff.

I have also held onto my stake in Staffline, which provides "blue-collar" labour for a variety of industries, but especially food processing. Staffline produced its annual results this week and they were a perfect illustration of how results announcements have changed.

Press releases of results often start with "Highlights". Twelve months ago, companies shone light on their growth and expansion. "Highlights" were full of bold ambition. Now, the greatest boast a company can make is that it is safe and won't be closed. On Tuesday, Staffline announced its "gearing" – borrowing as a proportion of the shareholders' net assets – had fallen from 28pc to 24pc.

In the old days, companies were criticised if they borrowed so little. They were accused of "failing to make full use of their capital base". Now, low borrowing is absolutely the fashion (except for the Government).

Staffline went on to trill about how the cost of its interest payments had tumbled by a quarter and that these payments were covered a wonderful 10 times by profits. The message was "we have been prudent, we are safe and our bankers are happy". The shares rose 15pc.

Many people feel big companies are safer than such small ones and I don't blame anyone wanting to feel safe. But small companies, as a generality, are much cheaper than large ones at the moment. They also have greater scope for growth. And, after Royal Bank of Scotland, surely no one is confident that size guarantees safety.

I don't hold any particular torch for Staffline, but it is a good example of what I see among plenty of small companies. Its share price, as I write, is 27p, a mere 2.5 times the earnings per share last year. That is seriously cheap. Over the long term, a rating of at least four times that would be normal.

A broker forecasts that its profits will fall this year but only by a little. The historic dividend yield is terrific at just over 10pc. Yes, the dividend could be reduced next year but probably not by much.

It does seem like the opportunity of a lifetime and one might be tempted to fill one's boots with the shares of companies like this.

The only thing that holds me back is the echo of the other message: that the economy is sliding down so fast and unpredictably that one should keep at least some cash in reserve.

http://www.telegraph.co.uk/finance/personalfinance/investing/shares/4961165/Stock-market-opportunity-of-a-lifetime-or-priced-for-a-depression.html

Opportunities in Calamities

Bad-news situations come in 5 basic flavors:

• Stock market correction or panic
• Industry recession
• Individual business calamity
• Structural changes
• War

The perfect buying situations is created when a stock market correction or panic is coupled with an industry recession or an individual business calamity or structural changes or a war.