Friday, December 17, 2010

What Types of Stocks to Own in a Sideways Market

Vitaliy Katsenelson, a Denver-based money manager of whom I respect, just published a "bible" on investing. He asserts that he is looking for a “sideways” market and screening for “companies that have a lot of cash.” He has a ton of cash too — a 35% cash position and lays out the reason very clearly: Nobody “can win buying an overvalued asset and hoping it will appreciate.”

The above is 100% consistent with WFG's
Paid to Wait approach of buying companies that:
  1. Are cash rich
  2. Have low debt
  3. Have paid dividends over a long period of time
  4. Have a record of increasing their dividends
  5. Have a high return on capital
  6. Have strong competitive positions within their business sector
Investing Lessons

1) If you are going to invest in the stock market, why not get
Paid to Wait? Paid to Wait for the future appreciation of the stock(s) that you own to unfold over time and ignore the day-to-day ups and downs!

2) Investing is a marathon, not a race. The future winning professional money managers will be the current laggards of 2010, who continue to pursue the virtues of capital preservation and income-orientation strategies over speculation.

3) If you are sitting on the sidelines, you are missing out, regardless of the future ups and downs of the markets. Investors who make all or nothing, 100% in or out bets with the stock market, are proven over the course of time to have shot a large hole in their foot. If there were only "financial gun permits" to protect them from the emotions that lead to ill timed decisions based upon the news media and fear.

4) I personally have a very low overall exposure to stocks of 38%. This is about as low as any long term investor should ever go.