The Next 3 Months on the Stock Market can be Good, or Bad – It depends what You do next

Lance Spicer, Editor - Trident Confidential, 6 Jul 2011, 9:01 AM

2 weeks ago, I told my subscribers…..

Markets often turn when you give up hope that they ever will, this usually within days of you selling your stocks and redeeming all your managed investments. Isn’t that always the way?

My advice is to stay put and consider buying more.

1 week ago, I told my subscribers….

The fundamentals are all pointing towards the market being oversold even after Monday’s rally.

What you need to do now, as we did last year when the same thing happened, is to hang in there, stick with your investments and consider prudently buying more on those down days because at the end of the day, the stocks we have aren’t just stocks in the stock market, but are real businesses increasing profits and growing – every single Trident Confidential and Trident Global Growth Fund stock is increasing profits – the best type of business to own. Look past short-term events that muddy our mental waters and focus on the long-term prospects for the great companies we have invested in. We will be well rewarded for our patience and “stickability”.

You See, Volatility works both ways…..

Volatility, an up and down market, signifies market confusion, or in other words, fear and greed emotions attacking investors in quick alternating bursts. For a market day trader, it’s heaven on a stick, for most investors it’s a nightmare, or appears to be. However, if you are the sort of investor who knows and understands exactly what you’ve invested in and understand that your investment will remain viable regardless of investor confusion, then you will always be able to soar through the “rough” times knowing it all be ok in the end. Even with the devastating GFC of 2008-9, I was confident that it would all be ok in the end as many of you will remember, and having a positive attitude meant we were able to pick up some great bargains during that time and made some great profits when the bounce came in March 2009. The point is, the market is never all bad or all good, it’s always somewhere in between. You only have to worry about YOUR companies and forget what the market thinks, because in the end, your stocks will be rewarded. Remember, 90% of what you worry about, never happens.

With earnings season in the US and Australia fast approaching, we can expect two things. One that corporate America will again turn in stellar results and set new records for profitability, although with smaller earnings surprises, as analysts start catching on that US companies are doing well. The second is that Australian companies will report profits at the low end of what was expected, but they will provide a gloomy picture going forward – nothing is more certain.

Not a Happy Time…

It probably won’t be a particularly happy time for many Australian investors as we may see our stock market continue to underperform nearly every stock market in the world. There is a solution though!

Diversify away from poorly performing Australian stocks and have a small (or large, as is your preference) portfolio of US based stocks that are performing in an economy that’s recovering. This is opposed to an economy that is clearly weakening (according to the Reserve Bank of Australia). Also you get to buy US stocks cheaper than Americans can.

One of the things ailing Australia’s economy is the strong dollar but by investing in US shares now you’ll be spending $0.93c to get a US$1.00 worth of shares. When, as many economists expect, the Australian dollar falls to it’s realistic valuation in the next 6 months to a year, you’ll see a substantial foreign exchange gain on top of any equity gain from stocks increasing sales and profits. It’s really a perfect, and possibly once in a generation opportunity to buy some of the best and safest companies on the planet.

Buying any old stock like Microsoft, Ford or GE is not good enough though. You have to find great companies with strong balance sheets and growing sales and earnings. That’s what we do at Trident Confidential, find great companies at good prices.

My Investing Strategy for the 3^rd Quarter

We are just entering the third quarter of the year and July is traditionally the best month of the quarter, however, this isn’t saying much as August and September rate as the worst two months of the year. Now, of course these are just historical statistics and should be taken with a grain of salt, however, it’s always a good idea to have some cash available for investment from now until the middle of September, a period of around ten weeks, as this is the time of the year when buying stocks is at it’s best. Last year I advised my subscribers to pick up some great stocks at around this time, which resulted in profits such as these by the following April 2011:

As you can see investing when everyone else was selling was the easiest way to make great gains just 8 months later. Also if you were wondering how we are going right now, well of the stocks we have bought within the last month, all are in profit to the tune of nearly 11%, which isn’t bad for a market that has gone sideways.

So, my strategy is to wait for a little bit of weakness in the coming weeks and to pick up some stocks I’m currently watching.

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