iBooyah.com Investment Matters

In our experience, one of the best ways to make money is to buy when others are fleeing. Consider the example of Yahoo! (YHOO), if we had bought this stock back in 2002 when it was trading in the low teens, we would have achieved a superior return.  Another example is General Motors (GM), GM was trading in the high teen about a year ago; today it is in the 30s.  What is common about these two examples is their long term viability is high. We are not saying a large company cannot go under.  What we are simply saying is, as investors we need to take a long term view and ask ourselves if the company will be able to survive rough times.  In the case of YHOO and GM, the answer is yes.

We truly believed all opportunities come in the form of a snake. If everything is rosy and going well, the stock is usually overpriced.  To become an above average investor, we encourage looking beyond the next few weeks and months.  Ask yourself where this company will be in a year or two from today.  If you believed there are ample evidences to suggest things will be okay, buy when it is in the tank.  Similar to YHOO and GM, the same can be said of companies such as Countrywide Financial and HSBC. In our view, these companies are going through a rough market where their business is uncertain in the short term.  However, when we look at where these companies will be a year or two from today, there is no doubt CFC and HSBC will still around and in a much better situation.

In our view, Countrywide Financial (CFC) trading in the low 30s ($33.39) is a buy. A point from its 52 week low, we believed this is an excellent opportunity to get in as the upside potential outweighs the downside.  When this subprime mess blows over, we believed CFC should be back in the high 30s, which is more inline with the company’s intrinsic value.  While some might be questioning why we continue to like CFC despite all the negative news, the answer is we believed in buying good companies when the sector is out of favor.  This makes the stock attractive because the risk is minimal.  In our view, this is the best time to buy, not when it is trading near its 52 week high.

HSBC is a Global lender; it is the third largest bank in the world.  The company’s target markets are Europe, U.S and Asia.  In our view, it is also an excellent company for the long term. Trading in the high $80s ($88.98) per share, we believed the time is almost right to get in.  As with every other mortgage lenders, the stock is down because of the projected slow growth and some bad loans. Six months ago, this stock was trading near a $100 per share. Today it is trading about 4 points from its 52 week low. The company is still doing well, but because this sector is currently out of favor, the stock has been on the decline.  While we would not yet buy this stock, we are closely watching it. HBC might fall a bit further.  Our target entry price is $86 per share.