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Now that we have seen a huge surge in the stock market, we cannot expect this rally to continue at the same pace. The question is then, what to do with the money? There is always market timing and trying to short the index, now that a correction might be gaining strength, but that is only short term and pretty risky.
Long term investments is about buying cheap something that can weather the shocks. Last year we could have bought anything, the only way to go was up. This year is a little different, we need to make a choice. There is always investing in the market index, but some stocks might do better. Hence a mix of index and good stocks look like a pretty good diversification.The index is very often made out of large caps, except for small cap indices of course.
So what's interesting for now? Buy-back stocks. These stocks are shares of companies that recently launched a buy-back procedure to buy their own shares. Research has shown that those stock, on average, outperform the market significantly. However, don't invest in any buy-back share without a thorough investigation.
Our research has shown that two stocks are worth looking at for the moment:
Both look healthy, with strong cash positions, low debt, but most important, their buy-back procedure tells us that the management believes the stock is cheap.
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