I am as big a stock market bull as anyone. The market has had a great run over the past few years and investors who stayed the course have made a great deal of money. I believe however a pullback is coming. It is simply too hard to find great values in the market now. Many great companies are trading at values (P/E, P/S, BV) that are simply too high based on their financials. (I love Amazon but a 1400 P/E ratio is outrageous for almost any company.
I have noticed that a number of my favorite stocks are not quite the bargains that they used to be.
I loved Bank of America in the $5 to $ 9 range. At $16, it is still a decent buy but it is not the screaming value that it was in the single digits.
I loved GE in the $5 to $15 range. Now at close to $30, the company seems properly valued.
I hated Facebook at $45 a share 18 months ago but loved it between $18 to $20 in the fall of 2012. It is now up to $54 and everyone loves it. As a contrarian investor, I am always anxious whenever the public consensus turns to bullish. I am not saying liquidate your entire position but you may want to book some profits on stocks that have shot through the roof.
This doesn’t mean that every company is overvalued but many companies have gone on great runs. I think it is prudent for long term investors to take some gains.
I still like Ford as I think it is substantially undervalued at $15 a share. Apple is a solid buy in the $500 range. Whole Foods is a good growth story with increasing comps and profitability. I have yet to see the time to sell Nike. Dividend yielders like AT&T and GlaxoSmithKline are still great income plays.
I am turning my attention to the metals sectors in the coming year. I think that metal prices will remain stagnant for the next year or two giving me time to purchase precious metals through dollar cost averaging. I am not quite ready to take the plunge into the gold market yet but there are a few metals that I plan on buying. I will unveil my investing strategy for 2014 on next week.