Don’t you love it when they say that? I know what they mean… huddle under known brands, but do you ever hear them say “you should really get out there and buy low-quality names”? There is the “Dogs of the Dow” strategy, which is sort of like that.
I’ve done quite well buying bottom rung companies at bottom rung prices before. I think those kinds of advices are meant for the casual investor.
This is equivalent to “the market’s going down in the future, so if you have to be long today, switch low-beta stocks”? In that case the better advice is “go short”? Or is it the same as “vol will continue to be high, and we assume you like a low-vol portfolio – regardless of market direction”? Are you watching TV again?
I guess calling something a “cigar butt” is as close to calling it low quality as you can get. Actually, kind of worse. I bought DLX below $10 a couple of years ago for yield and because it was trading at a ridiculous multiple. I would gladly concede it is a low quality name. I took a couple puffs on that nasty thing and sold it, admittedly too early.
I had CNBC on in the background, and kept hearing “buy quality stocks.” Which I thought was like the Mark Twain comment that the secret to investing is to buy stocks that go up in price and if they aren’t going to go up in price, you don’t buy them. Of course, there are a bunch of ways to define “quality,” so it’s one of those “I have all my bases covered.” Risky stuff at a good enough price can be good if you are diversified enough that you don’t get slaughtered by the ones that don’t work out. (e.g. DLX). I guess it’s hard to answer these things in a 15 second spot on TV. Anyway, I coined a phrase today I intend to use for a while: “You have to remember two things about the stock market: 1) it’s smarter than you are; and 2) it’s dumber than you are.”
Riffing on your 2): “The stock market can remain irrational longer than you can remain liquid”
Someone should call in and ask what they mean by quality names. I have no clue, but then again maybe I’ve just been looking into buying low-quality names this whole time? What do I know
bchadwick Wrote: > Anyway, I coined a phrase today I intend to use > for a while: “You have to remember two things > about the stock market: 1) it’s smarter than you > are; and 2) it’s dumber than you are.” And, sadly, it’s always right…
Quality names usually means blue chips with a long history of dividends…think JNJ. For Average Joe Investor’s retirement account, makes sense really.
Just don’t buy banks. I really enjoyed all the people on Fast Money and other CNBC shows this week saying. BAC has “no exposure to europe”, people are just selling it because its a generally traded stock. Uhmm has anyone looked at BAC’s balance sheet? It does not need exposure to europe to suck, it has sucked since 2008 and continues to do so.
My put options on BAC are deep in the money now. I’m actually thinking of buying call options if things keep getting worse. No way they’ll let it get ripped under.