Investment Grade Value Stocks (IGVS) Bargain Stock Monitor (06/30/2010)

Bargains Galore During May-June Correction!
& You're Reinvesting Your "Smart Cash" --- Right?

The Bargain Stock Monitor is one of three market statistics used as performance expectation analyzers for Working Capital Model (WCM) Portfolios. It is derived from the Month End Value Stock Watchlist spreadsheet. The Watchlist Program identifies specific IGVSI Companies whose stock is trading at least 15% below the 52-week high water mark, and that also meet the price selection criteria outlined in The Brainwashing of the American Investor: The Book that Wall Street does not want YOU to read. The "15% down" break point allows you to keep your eye on "Bull Pen" items. (You really need to be familiar with the selection rules to get the most from the BS Monitor - chuckle - and from the Watch List program.) 

The fewer IGV stocks at bargain prices, the stronger the market and the more Smart Cash that should be accumulating in the equity bucket of your portfolio. As the list of bargain IGV stocks grows (indicating market weakness), portfolio Smart Cash should be finding its way back into undervalued securities. 

• The 2009 Monitor clearly showed the end of the 20 month correction, reported the slow reduction in available "bargain stocks", and encouraged profit taking... At year end, just 5% of the entire IGVSI universe were at bargain price levels--- only 19 stocks... and the lowest level since the summer of 1987. 

• Market Cycle Investment Management Portfolios  were at their highest levels in nearly three years on May 2nd (Sandie's birthday)--- and well positioned to take advantage of the weakness that has rocked the world (markets) since. 

• In spite of the worst two month period we've experienced since early '09, 2010 activity has enhanced market values, increased Working Capital totals, grown income, and produced huge numbers of profit-taking opportunities in both equity and income securities. It's still a good year!

•  Only the shadow knows when the rally will resume --- BUT, you all should know that it will, eventually.  What matters is what you do with the rally profits you still have not reinvested, and how well you select from the buying opportunities that are knock-knock-knocking at the door (as predicted right here, for several months prior to the corection). 

• Remember, no correction ever lasts forever --- particularly since we have about maxed out on the bad news! Gather your buying opportunities while you may.

• If you did not take your rally profits, one of these things happened: (a) You were greedy, and ignored WCM profit taking guidelines; (b) you didn't have profits because you failed to make new equity purchases during the last correction; (c) you didn't want to be burdened with those short-term capital gains that have now disappeared --- yet again;  (e) you thought that the rally would last forever.

• The rally may or may not restart itself soon, but how many of you failed to heed this warning in April? Please don't forget to take your profits, and to reload selectively (and patiently) when new purchase opportunities appear.

• On the "income" side of your portfolio, don't hesitate to take profits and to reload into other positions --- compounding your earnings rate always makes sense, even after taxes. Both income indices moved upward (even net of dividends) in June.

• Finally, think about the painful (but essential) ATH decision making you took care of before the "maysacre" (sic) . If you don't know what this is, contact me immediately.

What does all this mean? See the Investment Grade Value Stock Expectation Analyzer.