The market correction over the past few days is an opportunity to start buying if your investing horizon is long term which typically is not a few months or even an year for that matter, it should span atleast 3 to 5 years and even longer. The economics of a business seldom change on a daily basis unlike the stock market that overshoots towards optimism and pessimism for the most part. Most of the good companies are having a significant correction, with some of them hovering around their 52 week lows. Currently the S&P 500 cos have more than 40% of sales outside the US and most of them are in a solid financial standing driven by the lessons learned hard during the credit crisis of 2008 - 09. The market correction may not be over yet, but putting some cash to work at these reasonable valuation levels makes sense. For an investor with a regular job and doesn't have time or interest in doing some level of research in stocks, the best thing to do would be to keep buying index funds or stocks with similar characteristics on a regular basis. But if you're really interested in picking individual stocks, buying atleast 20 to 30 stocks of good companies is proven to be least risky. This is for adequate diversification and to withstand any company / industry specific issues that affects the overall investment return. Generally speaking, a specific sector or rather company specific issues pose huge risks to a portfolio than the overall market risk. It has been proven beyond doubt, that to rely on very few companies is highly risky unless you're extremely knowledgeable about the economics of a specific business in all its aspects. Looking back at the collapse of companies like Lehman during the credit crisis in which many professional investors lost bigtime, it is anyone's guess as to the ability of an average investor in betting big on very few stocks. We don't know when this correction ends and how low it can go from here, the basic strategy is picking a bunch of stocks trading at reasonable valuation levels. When the clouds are all gone and everything is clear and sunny, bargains seldom exist and there is no formal announcement in Wall Street or main street saying the market has bottomed out and you can start buying - there won't be any sort of sirens going off indicating the maket is ready for the take off. But the big risk factor here is no one really knows how low things can go and how long before they turn up. If history is any guide, investing during uncertain and pessimistic times has not only given good but sustainable returns. With the debt ceiling, Euro crisis, emerging market slowdowns etc the United States is not going out of business anytime soon and its ability to unleash the human potential has not diminished by any degree. With this back drop here are some of the picks that are trading at reasonable valuations.
Financials / Insurance Industrials Shipping / Rail roads
American Express (AXP) Honey Well (HON) United Parcel Services ( UPS )
JP Morgan (JPM) Ingersol Rand (IR) CSX Corp ( CSX )
Morgan Stanley (MS) Eaton ( ETN) Norfolk Southern ( NSC )
Goldman Sachs (GS) Emerson Electric (EMR) Union Pacific ( UP )
Hartford Financial (HIG) Boeing ( BA )
Lazard ( LAZ ) Rockwell Collins (COL)
Jeffries group ( JEF ) Cummins
Equifax ( EFX ) Illinois Tool works ( ITW )
Rockwell Automation ( ROK )
Materials / Drilling Energy / Energy services Fashion / Retail
Cliff Nat resources (CLF) Transocean ( RIG ) Aeropostle ( ARO)
Mosaic ( MOS ) Slumberger ( SLB ) Coach ( COH )
Kennametal ( KMT ) Conoco Philips ( COP) Guess ( GES )
Gerdau Steel ( GGB ) Devon Energy ( DVN ) Tiffany ( TIF )
Freeport McMoran (FCX) BP group Gap Stores ( GPS )
Nucor Steel ( NUE ) Chevron
Posco Steel ( PKX ) Total
Banks Conglomertates - Economic Bell Weathers
US Bancorp (USB) General Electric ( GE )
Wells Fargo (WFC) Berkshire Hathaway ( BRK.B) - Class B
Citigroup (C)
ICICI Bank (IBN)
I hope this commentary is all yours. It's pretty good.
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