Tuesday, December 11, 2012

Santa Claus Rally to Continue

As a value investor, I find it difficult to participate in the stock market when prices are generally only fair, rather than cheap.  That is how I see the current market environment, with many stocks having risen significantly this year.  Yet, I still expect stock prices to continue to rally.  

During the market decline since September, I constructed a portfolio of undervalued and high-dividend yield stocks.  When I could no longer find individual stocks that met my purchase criteria, I added broad market participation through the SPY S & P 500 Index exchange-traded fund.

When technical and sentiment indicators signal that the broad market has become quite popular again with prices up sharply ("overbought"), I'll sell the broad market exposure and keep a core portfolio of individual stocks.  I still have a list of stocks that I intend to buy if they decline enough to reach my target purchase prices.

There are many confusing influences on stock prices at the moment, but I maintain that the likelihood is for a continued rise--though perhaps not new highs--in the major stock indexes.

Steve Lehman

S & P 500:  1430

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