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Investing In Stocks For The Sake Of Cash Flow

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Stocks Take Major Hit, Buying Opportunities Getting Closer

Posted on | August 5, 2011 | Comments Off

When you have the investing strategy that we do, you don’t look at 500 point down days in the Dow as a reason to panic, but a reason to celebrate. We’ve been waiting for many months even a couple of years for better buying opportunities in a few select stocks and we are getting closer.

Let’s take a step back and look what is behind the volaility.

First, the US economy is very much struggling. Economic data is weak at best. As such, there are renewed fears that we might move back into a recession. I believe we will re-enter a recession within a year or two - and it might be forced by increased government austerity.

Second, Europe is imploding. The debt and the currency system in Europe is a disaster. Yesterday, it was Greece. Today, Italy is the focus. Tomorrow it might be Spain. The reality is that the continent is imploding and there will likely be a massive devaluation in the Euro.

Staying on the Euro for a moment, if the Euro trades much lower against the dollar moving towards parity with the greenback, it will likely hit multinationals hard. Companies like Philip Morris Int’l (PM) get a great deal of revenue from Europe and their stock will trade down hard on such an event. This is a great buying opportunity for PM. Don’t pull the trigger on PM until we get a spike in European volatility.

Walmart has traded lower near $50 and is a buy at current levels. Below $50 it is a screaming buy.

The haircut that stocks just took is a welcomed price drop in many stocks we’re targeting. Because of the global events, I don’t think we’ve put in the lows so I’m still waiting. With that said, if you’ve been waiting for a prolonged period of time, buying stocks like WMT at current levels certainly aren’t bad ideas.