Fabulous Values. Glamorous Prizes. QuikClot Anyone?

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.

How

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?

 

trump-2327493_1920
The loss–oops–outsourcing, of 15,000 jobs never pleases.  How could it?

 

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.
Chart, GM, 11-26-18
GM’s weekly chart displays strong new price move–above EMA’s. The company’s restructuring plan strikes chord with investors to the tune of a +6% move, by far the best day in, well forever.

 

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.
Chart, GM, 11-26-18, daily
GM’s daily chart displays a post-“Death Cross” battlefield. We witness fledgling price action trading below a flattish 200 EMA. Simultaneously, both the MACD’s and Relative Strength indicators have worked above their signal lines, and display up-hooks. Bullish.

 

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.
Chart, IBM, 11-26-18
Perhaps in time IBM will benefit from the acquisition of Red Hat, an approximately $30 billion move, the most expensive tech buy in history. Yet despite owning more patents than anyone, the company continues to wander the wilderness. And monetizing Watson? How old is Watson now–20, and it still doesn’t have a real paying gig? But then, you do get the Death Cross.

 

What else do you get with great “value?”  You also get:

2.6%–I year sales growth.

S&P 9.6%

-5.2%–3 year sales growth.

S&P 9.9%.

2.2%–1 year EPS growth.

S&P 21.4%

8.4%–3 year EPS growth.

S&P 14.6%

0.1%–1 year forecast EPS growth.

S&P 17%.

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.

AAA Stockjaw scooter

STOCKJAW.COM

Images sourced from Pixabay.

https://pixabay.com/en/photos/
Pixabay.com is simply amazing–a sprawling compendium of joy.  Thank you Pixabay.  If you also know love and use Pixabay’s lavish resource, please take time to donate to them at Pixabay.com.  We do, truly.

Additional resources:

Investopedia.com.  Seriously Wonderful.  Fact.
http://www.investopedia.com/
Charles Schwab.  In Our Opinion, the best broker going.
https://www.schwab.com/public/schwab/client_home
STOCKJAW.COM EARNESTLY THANKS YOU FOR YOUR INTEREST AND WISHES YOU THE VERY BEST.  THE WORLD BEING WHAT IT IS, WE MUST POST THE FOLLOWING:  ALL CONTENT ON STOCKJAW.COM IS PURELY FOR GENERAL EDUCATIONAL AND ENTERTAINMENT PURPOSES ALONE.  ANY ACTION TAKEN BY ANY READER IS THE SOLE CHOICE AND RESPONSIBILITY OF SAID ACTOR.
Be careful.  Do the work.  Have patience, with yourself.  Never put your dreams away.

 

STOCKjAW

Dollars Are Employees. We Make Them Work. Slack Dollars Reborn Busy. STOCKjAW helps You make the dollars you worked for work back. Do it simple and streamlined. Or do it Full-Bore. Stocks, ETFs, and more. It's Your cash. Sj helps you point it in the correct direction.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s