Stocks

If you, like I, make your own stock picks then you know the potential frustration or anxiety of every day finding stock analysts advising you to hold, maintain a neutral position, sell and buy shares of stock in “Company X”. Same company, four differing opinons.

I recently invested in a company whose share price has dropped dramatically in the past 3-6 months. It’s a cyclical stock which, for a long time, has benefited from an upward trajectory. No surprise that the pendulum has swung downward. No surprise that I’ve read a variety of opinions online regarding whether to dump the stock or buy shares now that the stock’s price is at a 5 year low.

How do I know who is right or who to trust when it comes to picking stocks?

The short answer is that I’ve learned not to entrust – give over my decision – to a stockmarket analyst and industry specialist.

Why?

Because none of them are right 100% of the time. Some may have a better or longer track record but none are perfect.

Still, I often start my moves by scanning analyst ratings because there’s something rational about not swimming against a tide of negative opinion about a company or a market vertical.

The problem we individual investors face with “not following” the guidance of a stock pickers is 1) our limited time; 2) limited data;  and 3) what you or I don’t know about “Market Professionals” Tom, Dick, Harry and Sally. (Yes, there’s still a gener imbalance.)

Do you have time to dig into fundamentals? For me the answer is “yes” when it comes to verticals and “no” when it comes to all players in a vertical. That’s where relying on analysts makes some sense. What is the consensus about trends in the vertical in the short term?

However, when it comes to choosing to invest heavily in an individual stock – either for the long term or short term – that is when I 1) put in the time to read deeply about the company before investing in its stock; 2) when I access all manner of publicly available data – from SEC filings to the company’s on site data and more; and, 3) where I may dig into relationships between pundits and their markets.

There is a time and place for trusting financial advisors as well as a time for keeping your own counsel.

In the age of online media supported by eyeballs and ad revenue stockmarket opinionists, pseudopundits, blowhards, halfwits and dimwits are now $.10 / dozen. Anyone can play the game. Rightfully, that judgment (at least in theory) attaches to me.

Here’s the big oil and gas secret, which I now bring to the attention of anyone investing in E & P (Energy and Production) stocks and funds: Oil and energy stocks are “cyclical”. That is, they are well known to go up and down based upon conditions in the world such as growing or contracting economies, more people driving and owning houses (think China, Brazil, etc.), wars and conflict and other global factors.

Oil by the barrel prices are now “out for a spin”, driving up, down and sideways. OPEC is talking. T. Boone Pickens is talking. Everybody is talking about oil and gas because the E & P market is in flux. Just like it was in flux a few years ago. Then it stablized and continued its upward trend. Why?

Because the world continues to grow and with that the demand for energy and for products that depend on oil, such as plastics, drugs and most everything else.

Is NOW is the time to sell E & P stocks? AFTER they’ve recently taken a beating by panic sellers or those who make their living trading in and out?

Is your strategy to “buy high, sell low” on a cyclical like oil?

One thing that is certain about oil is that as fast as it has gone down it can and historically has gone up. You can look it up.

If you’re going to sell on the down low and cheap who will be on the buy side of this bad investment? Fools or smarter investors that you?

Energy is a cyclical investment but, if you study the charts, those cycles have occurred in a steady upwardly trending price chart.

If you didn’t know that when your bought in then you’re the fool.

If you sell a cyclical at the bottom or near bottom you’re the fool.

I’m not a big fan of Big Oil but until consumers demand, with their wallets, energy alternatives Big Oil will be a long term player and so should you.

Me too. I watched and waited to make a move until a few days ago. I may not have picked bottom but for the cyclical energy market I certainly waited to let the downward graph move down a good bit.