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Bargain Hunting on the Stock Market

8 August 2006 - Features - Editor

The stock market scene during the second half of 2006 may not be as bright and bullish as the last 12 months have been. This could be a good time to pick up stocks of companies which are undervalued by the stock market community as a whole. It is common knowledge that irrational sentiment and herd mentality drive stock market values when the macro economic outlook is hazy, and this tarring of all equities with one brush has the makings of an exciting treasure hunt!

The easiest way to shop for stock market bargains during relatively quiet and even bearish phases is to invest in emerging technologies which you know well. Consider your professional experience and think of major discontinuities which you know are on the horizon. Start-ups established by accomplished technocrats are often enormous reserves of value, as they are likely to merge with or get acquired by leaders of the relevant industry segment.

Most stock market members have degrees of seasonal fluctuation in demand for their products and services, but this is greatly accentuated in some sectors. Fungicides and hygiene products are typical examples, with almost zero demand when the weather is dry and amazing order peaks which no supply chain can meet after every Katrina or even minor storm. Pesticide companies are especially vulnerable to adverse stock market sentiment whenever reports surface of toxicity and accidents, yet we simply cannot do without such products whenever conditions favor pest outbreaks and epidemics. Shares of professionally run companies in this business, with sound risk management systems in place, are always good buys when the majority of stock market investors are aligned against them.

New entrants in the ever-appreciating gold market are other favorites for stock market bargain hunters. They are great buys before they start making profits and paying dividends provided that they secure mining rights to significant gold reserves. Many of these mines have stores of other precious metals as well. The great thing about gold mining is that companies value their reserves very conservatively, with a discount of about 25% from prevailing gold prices.

We could carry on in this vein at length, but suffice it to assert that discerning stock market investors should also look long and hard for great value equity. Please join our forum and let us benefit from your experiences and insights in this regard.

 


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