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« Musings: A Mini-Linkfest | Main | TCA-ETF Update »

February 05, 2008

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Mike C

Panic often leads to opportunity, because panic selling does not discriminate. It is a shoot first, ask questions later mentality.

Jeff, in a previous comment you had asked a question about "helping individual investors" and how to do that.

IMO, one component or theme maybe to explore is that opportunities always exist in every environment despite whatever issues exist in the financial markets and economy.

One point you've made is that many individual investors end up sitting in cash because they are paralyzed by fear and bearishness, especially in the blogosphere. I agree many individuals are making a big mistake here. IMO, even amongst many professionals there is too much focus on the "stock market" as opposed to the "market of thousands of individual stocks".

I want to use an example, and to be clear I'm not trying to talk up my book. Anyone reading should do their own due diligence, and make their own decision, and my opinion/position is always subject to change given new information and ongoing review.

I am long the stock Chesapeake Energy (CHK) which is one of the largest domestic natural gas producers. Prior to the recent market correction, the stock had hit 40ish. During the recent correction, it dropped to around 35 and has since rebounded to 41 which is very close to a new 52-week high. The company trades at a trailing P/E of 13 and forward P/E of 11. During the recent decline, the CEO purchased roughly $20 million in stock.

http://www.tradingmarkets.com/.site/news/Stock%20News/1057886/

"I believe CHK (Chesapeake stock's ticker symbol) is a very attractive investment opportunity, especially when it is pulled down by economic issues not related to CHK or the natural gas industry," McClendon said Thursday about his buys."

I also believe CHK is an attractive investment opportunity but that is beside the point. The point is that it's potential has absolutely nothing to do with ISM data, BLS job data, monoline insurer issues, government bailouts, Fed TAF auctions, consumer spending, etc.

You do an excellent job of covering these issues, and presenting another perspective that is beneficial to individual investors (and fellow pros).

Still, I would point out that individual investors doing their own research and managing their own portfolios should not let what might be tangential issues distract them from the numerous opportunities that likely exist in the financial markets at any given point in time.

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