In a previous article we talked about using caution going forward because there may be a market correction on the horizon. We talked about how uncertainty spreading around the world could breed fear and panic, especially if the US did not raise the debt limit.
Fast forward a few days. In Europe anxiety is spreading across the continent. Attention has now turned to Italy (the world’s eighth largest economy) and Spain. Bailing out Greece, Ireland, and Portugal, is on a scale much smaller than trying to bail out Italy and Spain. Will it come to this? Don’t know but just the possibility is spreading fear through the markets. In the US an agreement was reached on raising the debt limit but not the grand bargain that would put the US back on the road to fiscal austerity. Unfortunately there was no long-term solution. Basically the can was kicked down the road; the uncertainty remains. These events are increasing levels of fear and panic in the markets. On Thursday, August 04, the markets plunged on these concerns. The DOW (DIA) dropped 4.3%, the S&P (SPY) 4.8% and the NASDAQ (QQQ) 5.1%. What’s an investor to do? Stay in control of your emotions and base your trades (buy or sell) on sound investment decisions, not panic or fear. Companies with a history of solid cash flows and earnings will probably weather the storm better than companies with little or no track record. Below is a list of potential stock ideas with a history of earnings and operating cash trading at discounts to our fair value and consensus estimates (source: Yahoo). We also decided to limit the list to stocks whose yields are above 2%, adding to their possible appeal.
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