por Victor VE » Lun Ago 08, 2011 12:54 pm
Investors: Time To Profit, Not Panic, From The Stock-Market Sell-Off (DIA, SPY, GLD, SLV, USO)
Kerri Shannon: Thursday’s stock-market sell-off has injected investors with more fear and uncertainty – but this is not the time to panic.
The Dow Jones Industrial Average (NYSE:DIA) on Thursday fell 513 points, or 4.3%, and regained only 0.54% Friday to close at 11,444.61. The Standard & Poor’s 500 Index (NYSE:SPY) fell 60.27 points, or 4.8%, Thursday and slipped another 0.06% Friday to close at 1,199.38.
But that may be just what the market needed.
“This market was badly in need of a sell-off, so what’s happening now is long overdue,” said Money Morning Chief Investment Strategist Keith Fitz-Gerald.
Not only was the stock-market sell-off bound to happen, it’s going to create new profit opportunities that could offset the losses many investors absorbed during the correction.
“We may take some small losses, but we’re not going to get killed,” said Money Morning Contributing Editor Shah Gilani. “There are going to be life-changing opportunities for us in the very near future and the next 18 months. I’m talking seriously huge, massive opportunities.”
Our financial experts have put together the following tips on surviving the market roller coaster ahead:
* Focus on large-cap dividend stocks – and mind your protective stops.
* Don’t forget gold (NYSE:GLD), silver (NYSE:SLV), and oil (NYSE:USO).
* And get ready to buy – the best companies, which still have strong earnings, will be going on sale.
Stay Calm, Preserve Your Wealth
A steep stock-market sell-off can become more dangerous than it needs to be when investors forget to remain calm – something our financial experts urge you to do, especially because allowing fear to drive you out of stocks means you’ll miss profits.
“The thing that I’m really concerned about is this market is driven by sentiment, and sentiment is beginning to feel like panic,” Fitz-Gerald said. “When panic sets in, everybody runs for the exits at once.”
Investors often mistake being safe with staying away from the markets – but they’ve got it all wrong.
“In reality, being safe means hunting for profits in areas we know will charge ahead when things are tough,” said Fitz-Gerald.
This means playing defense and preserving your wealth, and one smart way to do that is large-cap dividend stocks.
Raytheon Co. (NYSE:RTN) and ConocoPhillips (NYSE:COP) are two good options.
And like always, don’t forget your protective stops: Use them to capture profits and protect capital.
The Big Three: Gold, Silver and Oil
Market volatility last week even caused wavering in gold and silver prices. Gold for August delivery ended with a small gain of 1.3% for the week, closing at $1,648.80 an ounce. Silver for September delivery fell 4.7% ending the week at $38.211 an ounce.
However, prevalent market uncertainty means the outlook for these precious metals remains bullish.
“I see gold moving up to $2,500 an ounce and silver north of $60,” said Fitz-Gerald. “So use pullbacks to buy in or add to existing positions.”
Investors should also keep their hands on oil plays. Gold, silver and oil have attracted many retail investors but central banks around the world also are piling into the commodities. Many are looking to diversify away from dollar-denominated assets and protect against market drops.
“Foreign governments are buying all three heavily,” said Fitz-Gerald. “They’re buying for the same reasons we are (and will continue to do so): to hedge the uncertainty associated with our own greenback, preserve purchasing power, and keep upside in play.”
Korea last week announced it had bought 25 tons of gold over the last two months for $1.24 billion. China has been stocking up as well, although Beijing remains secretive about its total gold purchases.
While Fitz-Gerald forecasts gold prices will reach $2,500, Money Morning Contributing Editor and natural resources expert Peter Krauth sees an even brighter future for the yellow metal.
“I’d say that we’re actually looking at $1,900 for 2011, $2,500 for 2012, and $5,000 by 2015,” said Krauth.
Write a Market Shopping List
The markets may tumble, but most companies’ fundamentals remain unchanged. They still have plenty of profit potential. And what’s more is that they are about to go on sale, meaning you can go stock bargain hunting.
“There are a lot of good companies that still have good earnings, that still have good operations, and if you’re a long-term strategic investor, now’s the time to get out your pencil, sharpen your list and go shopping – even if we haven’t hit the bottom,” said Fitz-Gerald.
Fitz-Gerald says investors should focus on “glocal” companies – large multinationals successfully branching out to emerging economies and positioned for explosive growth form those markets.
“Glocal” standouts reported some of the best results in second-quarter earnings season. McDonald’s Corp. (NYSE:MCD), General Electric Co.‘s (NYSE:GE), and PepsiCo Inc. (NYSE:PEP) all posted strong earnings.
How Much Farther Will Markets Fall?
Luckily Friday was not a repeat of Thursday’s steep market slide – but investors are certainly in for a shake-up.
The disappointing U.S. debt deal will keep the market jittery, as Congress works on more spending cuts and tries to avoid a U.S. credit rating downgrade.
“How far it goes is going to be dependent on a couple of things which unfortunately seem to be falling in place, chief among which is the fact that U.S. debt is out of control, the agreement Washington reached is a sham, and U.S. President Barack Obama really is grasping at straws here for something that he should’ve had in order to begin with,” said Fitz-Gerald.
Still, that doesn’t mean we’re doomed.
“This is not the end of the end of the world, although it feels like it,” said Fitz-Gerald. “We’ve lived through worse. And we will get through it.”