Market correction can spell opportunity for investors
How will we know when the stock market has stopped falling? We won't. "This correction has more time and pain to go," Hank Smith, chief investment officer at Haverford Trust Co., warned clients in a note Tuesday.
How will we know when the stock market has stopped falling?
We won't.
"This correction has more time and pain to go," Hank Smith, chief investment officer at Haverford Trust Co., warned clients in a note Tuesday.
Yet Smith, like other investment pros at firms with stocks to sell, still urged investors to consider "buying on the dips" in the market.
He suggested that clients especially consider big, rich "blue-chip" companies - maybe Exxon, GE, Microsoft, Procter, and Wells Fargo - whose fat dividends yield owners more cash than today's anemic corporate and Treasury bonds.
The drop in the widely followed S&P 500 stock index, which has fallen 11.2 percent since Aug. 17, hasn't stopped prognosticators from urging investors to bargain-hunt among depressed U.S. shares.
To the contrary: Decline spells "opportunity," Daniel P. Wiener, publisher of the Independent Adviser for Vanguard Investors, suggested to investors before the market opened Tuesday.
Wiener put some simple math in his pitch: He reviewed the last 54 times the S&P 500 fell 3.5 percent or more in a single day (as it did Monday) and said stocks were five times more likely to rise than fall over the following 12 months.
Nothing guarantees this time won't be different, though.
Some analysts dismayed by recent trends urged investors to reconsider their favorite stocks.
In one fortunate prediction, analyst John Ransom, at Florida-based Raymond James & Associates, touted StoneMor Partners L.P., the Levittown, Bucks County-based cemetery operator, before the market opened Tuesday.
With StoneMor stock down 21 percent since July, Ransom gave the company a "Strong Buy" rating, citing its steady dividends, fat cremation profits, and potentially lucrative marketing deal with the cash-strapped Archdiocese of Philadelphia. StoneMor rose 5.16 percent Tuesday to close at $25.07.
Analyst Paul Newsome, at New York-based Sandler O'Neill + Partners, recommended Ace Ltd., the Swiss-based global insurer whose major U.S. offices are in Philadelphia. Newsome said the market drop underpriced Ace on the eve of profit-boosting cost cuts from its pending merger with Chubb Corp.
But Ace still dropped 1.58 percent, closing at $99.72.
Falling stocks yield "an opportunity to buy quality banks at attractive prices," despite years of depressed small-bank valuations, argued chief executive Ted Peters and chief investment officer Jason O'Donnell in a report to their clients at Bluestone Financial Institutions Fund in Wayne. They wrote that loan and credit-quality records show "little evidence to suggest a financial crisis" in the United States, whatever might be happening in Asia.
Indeed, despite the drop in share prices, "the bull market isn't over," Haverford's Smith insisted. "The risk of recession in the U.S. is small, and bear markets develop in anticipation of recessions."
He concluded that he won't be worried, as long as American businesses keep hiring a little more and consumers keep buying cars and homes at modestly higher levels.
(215)854-5194@PhillyJoeD