QuikClot, n.–brand name; Z-Medica:
a hemostatic agent containing zeolite beads used to promote clotting and activate the coagulation cascade of blood, in traumatic, life-threatening, soft tissue wounds. Current form; kaolin coated gauze application, directly targeting factor XII in the blood clotting cascade.
cheap is cheap, and how much might that cost you in the end? Buying cheap in a tumbling market may mean “bring QuikClot.” Cheap can be a funky dead money pit. Those are known as “value traps.” We have a prime example, maybe four.
Diversification ranks as the only free lunch and everything else costs. Prices vary but actual “value” varies more. Nature provides in the summer and takes away in the winter. Bulls provide while they run and value calls when they stumble, or are tripped.
Are low price-to-earnings multiples, or flouncy dividends, reasons to buy? STOCKjAw swivels a spotlight on value now.
On any given market day…
Reckless value tale.
It’s not a value if you have to dial 911.
“Cheap you say?”
Cheap doesn’t equal smart and smart doesn’t mean scared and scared doesn’t mean stupid. “What about cheap?” “Nothing less than a leader, thank you. Well, maybe something now cheaper and solid, like TDOC.” Question. Is it really cheaper, or does it just cost less?
Value traps are often not labeled. They may pass the fast smell test. Examples? GE? WFC? UA? GM? IBM?
Think “GM,” after Monday’s surge. It’s a two-for; a “Death Cross” and a fat 4.23% dividend–all for a 6 forward P/E, 0.44 peg. That’s value, right Bub? Oh, and the president hates the restructuring plan. You think he’ll let that go?
Remember years ago when the government was divesting out of GM shares, following the bailout? What was GM trading for then? $35 bucks. Yesterday, many years on, the price sits at $37.65. That’s not value. And now, in turn-around mode?
11-26-18, Close, weekly.
Market Edge Second Opinion rates GM a “Buy,” with a strong 50-Day Relative Strength rating of 1.14(readings above 1.05 ranking as strong).
11-26-18, Close, daily.
The point of an actual sale is to purchase merchandise we would normally want to own anytime. Many money managers and investors will tell you about “reversion to the mean.” Many might also tell everyone to “short.” Hum….is that something most would do normally? For us, shifting circumstances does not translate into shifting investment strategy. And then there’s “buying the dips.”
Far savvier players than us have clearly stated that “playing the dips” stopped working in September. Ah, right. “Facts are stubborn things.” John Adams.
Valuation is the market mantra. How about a forward P/E of 8.65, and a flouncy dividend at 5.36%? Think “value.” Think IBM?
IBM 11-26-18, Close.
What else do you get with great “value?” You also get:
2.6%–I year sales growth.
-5.2%–3 year sales growth.
2.2%–1 year EPS growth.
8.4%–3 year EPS growth.
0.1%–1 year forecast EPS growth.
Date source: Schwab Equity Ratings Report, 11-26-18, 05:43am EST.
When markets “correct” real opportunities emerge, along with the choad. Stocks are revalued, many below levels appropriate to fundamentals. Low P/Es and flouncy out-sized dividends stand out like a free lunch. Professionals and individual investors swarm like roaches.
Buy quality, not chaos. And WFC and GE? Chaos, crime, and long-term dysfunction. Those conditions are not a reflection of quality, at any price.
Yet stocks worth owning rest on a much wider fundamental foundation. Anything worth owning must be backed by more–strong cash flow, expanding margins, and savvy management. Cheap can be good, but often it’s just cheap, and for many valid reasons. Buy quality and worry less.
Thanks for reading.
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