I want to throw a couple hundred dollars into the market, and I was wondering what anyone would recommend.
Obviously it is more about getting my feet wet, but other than guessing at things, I have no idea what to bet my money on.
I tried a search for this sort of thing, but haven’t seen anything.
Whose stock has gone down but is likely to rebound in the next few years?
Obviously- no one giving advice is liable for any loss I may suffer! 
Thanks!
The best strategy is to buy what has been beaten down the most. That would be financial stocks. Citibank or AIG are good bets. A financial sector mutual fund would spread the risk versus buying one company.
I think electric utilities are going to do well with Obama’s pushing of alternative energy. Plug in electric cars would be a boon to utilities. GE is hammered right now but is a good bet with a P/E under 10.
ETA: A low stock price does not equal cheap. Berkshire Hathaway is cheap right now at $86,000 a share. Lots of $2 stocks are expensive.
I pick gold. That’s what we’re investing in. Gold mines!
NO NO NO on financials! There’s a reason why they call it catching the falling knife.
BRK/B is a cheap and safe bet (and is discounted compared to the A as of late, so unless you care about shareholder votes…)
Many techs have been beaten down unfairly, despite doing fairly well in the recession–they seem to have more than their fair share of “beat analysts exceptions” – GOOG, AAPL, NFLX, RIMM. as of late, Nasdaq has been outperforming the S&P.
TIPs are allegedly underpriced, but some like Mish don’t think so. I think Gold is overvalued at the moment. I’d stay far away from gold and other commodities until we actually see inflation coming; e.g., money is actually flowing back to consumers’ pockets. I don’t see that happening anytime soon, stimulus nonwithstanding.
One of the first lessons I learned about investing is that a very low P/E ratio signifies that the stock is a stinker (as opposed to being cheap). I thought that STX and JAVA were “cheap”. lol, there was and is a good reason investors are scared stiff of these.
It can be hard valuing a stock’s current worth, because so much of the future valuation has been built in. You are very very unlikely going to be scooping up “deals” that no one else has anticipated. There are a whole lot of much, much smarter people with much, much bigger moneybags than you. I’d just stick with an ETF index fund, S&P or NASDAQ, with as low an expense ratio as possible.
The entire market comes readily to mind. You can easily buy an ETF encompassing the Dow, the S&P 500, the S&P 400, etc. Take your pick.
If I had $500, I’d buy (almost) 5000 shares of Sirius-XM (SIRI). It’s at 11 cents, and it just HAS to go up! I wouldn’t spend the rent money, and I am not a finance guy, etc. And I know that, in fact, it does NOT literally HAVE to go up, I’m just confident.
Joe
When stocks are that low, those in the know believe that the stock is much more likely to hit zero than go up. Stock prices like that are the Wall Street equivalent of a sucker bet.
I’m putting all I can into GM and Ford right now. Long term, both of these companies will rebound (I believe).
I’m unconvinced they’ve hit the bottom.
I think solar has a good future, and because the price of oil is down (I believe that is only temporary) there isn’t much interest in it the sector now.
The problem with that kind of speculation is that there are millions of investors out there who are thinking along the same lines. For example, stocks like stem cell research, builders stocks, etc reached a local peak shortly before or after the election, exactly due to investors speculating along the same lines, and have been at a high plateau since. It’s hard to see solar succeeding without high oil (realistically), and it’s hard to see high oil or any other high commodities without a recovery.
IMO, the only way to succeed in picking individual stocks in the market, without making a living at it, is to trade only in stocks you know well about. I am a programmer, I have a CAPS account at Fool.com and my track record in tech with a mixture of underperform & outperform call is 100%. Other sectors, not so much. As strange as it sounds, after I discarded the stock screeners that everyone and his mother uses, and went with what I knew about the companies and their projects and future aspirations, I did great on CAPS. GOOG, for example, has been a favorite of bears for a long time, but I am 95% sure it isn’t going anywhere bad.
However, that particular insight, ironically, has turned me off investing in individual picks. Out of the many, many, many thousands of posters and experienced investors on Fool.com, presumably a cross-section of the Internet community biased towards being extremely knowledgeable in investing, I know of only a very few that really did strike it lucky. The vast majority of those who did retire early, did so by miserly means. As a general rule, there is no substitute for austere living and saving every penny that you can.
Waiting for the bottom is a losing strategy.
The crisis in the financial sector hasn’t even played out yet. If Lehman Brothers, that survived the Civil War, Great Panic, and the Great Depression, can fall, so can any of the other banks. AIG needed a 144 billion lifeline to avoid bankruptcy and still no light in the tunnel for it despite burning all that cash up. Bank of America hasn’t shown great judgment in acquiring Merrill Lynch. Citibank got saved only thanks to taxpayers forking over 300B.
There is also a lot of dissatisfaction with how the bailout funds have been handled, and a proposal to bar stocks receiving funds from paying dividends is gaining traction. Dividends are a major attraction of financial stocks, and if that’s gone, well…
The only one off the top of my head I’d bet actual money on surviving is WFC. The others might survive, but I’m not going to sink money in them until, well, the train off the cliff starts slowing down. IIRC, the financial sector stayed in the tiolet for quite a while after the rest of the market recovered from the Great Depression.
No, it’s not prudent to time bottoms. But it’s not prudent to run out in the storm while the knives are still falling, either.
You may be right - I stated that I know nothing at all about finance. But it’s only 500 bucks, and the upside is rather huge at that price. And I, personally, believe in the product. I wouldn’t spend $5000, but $500 I would.
Joe
There are better investments out there right now. Do you have a local dog track?
I don’t know, I can’t see GM or Ford going away, If I had to buy stock, thers where I would go.
When Citibank was rock bottom (still is) my wife and I bought some stock. It was for an amount that wasn’t that big of a deal for us, so if it pans out great; if not, we probably would have pissed that much away on stuff we don’t really need anyway. I think of it as file and forget stock, I’ll check back on it in a few years.
An excellent pick in this sector that has solid financials is First Solar (FSLR). But sector stocks are always volatile, so do your homework.
As for buying “what has been beaten down the most” (Lamar Mundane), I think that’s very poor advice. Those financial companies are on the verge of (or have already declared) bankruptcy, and the end of the slide has not been seen yet. Unless and until those companies show a financial recovery plan that makes sense, I’d stay as far away as possible.
That’s probably what investors said about Studebaker and Willys.
Right. You don’t want wahat has been beaten up most, because those companies have reasons to have been beaten up. Rather you want the companies that are perfectly fine, but have been dragged down because everything around them sucks.