Valuations Are Becoming More Attractive
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Valuations Are Becoming More Attractive Steven L. 07-14-2008
Posted by Steven L. on July 14, 2008, 12:10 am
In the past year:

FSVLX: down 64% (home finance***)
FIDSX: down 48% (financials)
FSAIX: down 47% (airlines)
FSAVX: down 35% (automotive)

These are the sectors that have become fantastic bargains of late. If
any of them turns around, the eventual profits from getting in near the
bottom could be huge. Keep your eyes on them!


*** One reason for FSVLX's outsized decline is that nearly one-fourth of
its total assets were invested in Fannie Mae and Freddie Mac. But
hopefully the worst is over for those two mortgage lenders.


--
Steven L.
Email: sdlitvin@earthlinkNOSPAM.net
Remove the NOSPAM before replying to me.

Posted by FrediFizzx on July 14, 2008, 1:34 am
> In the past year:
>
> FSVLX: down 64% (home finance***)
> FIDSX: down 48% (financials)
> FSAIX: down 47% (airlines)
> FSAVX: down 35% (automotive)
>
> These are the sectors that have become fantastic bargains of late.
> If any of them turns around, the eventual profits from getting in
> near the bottom could be huge. Keep your eyes on them!
>
>
> *** One reason for FSVLX's outsized decline is that nearly
> one-fourth of its total assets were invested in Fannie Mae and
> Freddie Mac. But hopefully the worst is over for those two mortgage
> lenders.

Well, you know that home finance and financials will eventually get
turned around so are good buys right now for long term investors. I'm
not so sure that airlines will ever be good again unless oil comes
down a bunch for some funny reason. But that FSAIX is invested in
other things besides straight airlines. Autos ought to get turned
around also eventually. People are going to get tired of the SUV's
gas hogs and trade them in for better economy sooner rather than
later.

Fred


Posted by -herb on July 14, 2008, 4:39 am

> In the past year:
>
> FSVLX: down 64% (home finance***)
> FIDSX: down 48% (financials)
> FSAIX: down 47% (airlines)
> FSAVX: down 35% (automotive)
>
> These are the sectors that have become fantastic bargains of late. If any
> of them turns around, the eventual profits from getting in near the bottom
> could be huge. Keep your eyes on them!
>
>
> *** One reason for FSVLX's outsized decline is that nearly one-fourth of
> its total assets were invested in Fannie Mae and Freddie Mac. But
> hopefully the worst is over for those two mortgage lenders.


It's always tempting to 'buy low' but I'm not at all confident that the
troubles are over for any of these sectors.

Aren't Fannie and Freddie being pressured to raise capital by selling new
shares, further diluting the value of current shares?

I'd feel better about financials if I thought this whole crisis had worked
its way through the system but who knows?

I agree with Freddie that it is hard to see airlines as ever being
profitable but I don't think it is going to help automotive as consumers
switch from high profit gas guzzlers to low margin economy cars. If I saw
any company shifting its product mix toward efficiency I might consider that
company.

This is why I like to use managed funds. Someone else can lie awake at
night worrying about this.

-herb



Posted by Steven L. on July 14, 2008, 12:26 pm
-herb wrote:

> It's always tempting to 'buy low' but I'm not at all confident that the
> troubles are over for any of these sectors.

I'm waiting for a sign of an incipient turnaround. The eventual
bursting of the commodities bubble will cause a sharp drop in oil (and
hence fuel) prices. That's just the shot in the arm that could send
airline stocks and automotive stocks soaring.

What could cause the commodities bubble to burst? A sharp rise in
interest rates by Bernanke, causing the dollar to soar. Or the next
worldwide recession, perhaps. Or even the easing of tensions in Iran
and Iraq. All kinds of possibilities.


> Aren't Fannie and Freddie being pressured to raise capital by selling new
> shares, further diluting the value of current shares?

But the Government is promising to buy excess equity in F&F, making the
Government into a minority shareholder of F&F. So that will eat up any
dilution.


> This is why I like to use managed funds. Someone else can lie awake at
> night worrying about this.

If you're interested in funds that make big top-down sector bets,
consider CGMFX. This past year, they went long on industrial materials
and metals, and short on financials. Exactly the right strategy.


--
Steven L.
Email: sdlitvin@earthlinkNOSPAM.net
Remove the NOSPAM before replying to me.

Posted by Evojeesus on July 15, 2008, 3:45 am
> -herb wrote:

> > It's always tempting to 'buy low' but I'm not at all confident that the
> > troubles are over for any of these sectors.

> I'm waiting for a sign of an incipient turnaround. The eventual
> bursting of the commodities bubble will cause a sharp drop in oil (and
> hence fuel) prices. That's just the shot in the arm that could send
> airline stocks and automotive stocks soaring.

I hope such a drop is going to happen as it will be a brilling chance
to back up the truck and buy stocks & commodities related to energy.

> What could cause the commodities bubble to burst? A sharp rise in
> interest rates by Bernanke, causing the dollar to soar.

Would the cause the dollar to rise much, especially if you still have
problems with the economy and the banking system?

> Or the next
> worldwide recession, perhaps.

That seems more probable, IMO.

> Or even the easing of tensions in Iran and Iraq. All kinds of possibilities.

Yes, unless "peak oil" is closer than we think. I hope we're not.


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