time to dip a toe in the water?

dipping atow back in

I found myself buying small amounts of stock late in the afternoon yesterday–TIF and LVS.

Neither will do well in a recession.  But I’m reading the current selloff as more a cocktail of fear and (previously) relatively high valuations than as a harbinger of severe falloff in economic activity from today’s level.

Each stock has dropped by about 25% from its recent high. TIF is trading at about 16x what I think current year earnings will be.  True, LVS has the issue of ongoing litigation by the former head of its Macau operations (he’s asserting regulatory improprieties by LVS there).  But I think the stock is trading at a substantial discount to the value of its fast-growing Asian operations alone (see my recent post on LVS’s earnings)–assuming its US holdings can service their debt but are otherwise worthless.

more attractive stocks?

I’m sure there are other cheap, and perhaps more attractive, stocks but these are the ones that have caught my eye.

why now?

To me, watching myself trying to interpret the market runes, the interesting thing is that I’ve started nibbling.

How so?

We’re now seeing  a massive wave of negative emotion that’s expressing itself very forcefully in sharp stock declines.  Recognizing this, I determined that I was going to bolt myself to the sidelines.

Three observations:

–the market can’t sustain such a high level of fear for a long time, but

–personally, I tend to underestimate the force of these waves, and

–I also tend to underestimate their duration.

So, in a market like the current one–unlike the toing and froing within a clearly defined trading range that we’ve been experiencing over the past several months–experience tells me I’m better off waiting for the market to turn before stepping in.

Nevertheless, I bought a small amount of stock yesterday.

What does this mean?

It could just be one of my flaws as an investor.  It may be that I’m misreading the situation very badly.  If not, this amazingly strong downward movement, where every attempt at a rally quickly peters out, may be closer to its end than the charts suggest.

What should you do?

Obviously, everything depends on your financial situation and your risk tolerance.

I’m a very aggressive investor.  If anything, I tend to be too optimistic and therefore too early.  And all I’m doing is adding about 1% to my stocks.

The best thing for anyone else may be not to transact.  But it wouldn’t hurt to think about what, if anything, you might buy/sell and record those hypothetical trades somewhere to look at after the markets calm down.


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