Friday, March 31, 2006

What Fundamentals

So your looking to invest in individual stocks for the long term. What fundamentals are most important to look at now if there is a recovery in the markets? Are companies with a lot of cash on hand able to do better once a recovery takes hold? And what sectors do best in the current market we are facing?? Thanks for answering...sorry there are so many questions....

Actually, sitting on a pile of cash is more of an advantage going INTO a slowdown than coming out of one. Coming out of recession, those firms that used cash to expand during the downturn will fare best. Also, if you think a recovery is coming you'll want to be buying stocks in "cyclical" industries -- such as health care and bio. And you'll want to avoid stocks in consumer staples, such as groceries, drugs and consumer products.

Do you still believe in the rule that you should sell if your stocks fall 10%? With it being so hard to determine Fact from Rumor how can you be sure it's the right thing to do?

Matt Krantz: Absolutely -- in fact, more than ever. As discussed above, investors that've been utterly wiped out by stocks like Lucent, Enron and Worldcom probably wished they'd cut their losses at 10% when the companies were still "good companies." The good thing about having a 10% rule is that you never have to separate between fact and rumor -- since you protect yourself no matter what.

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