Making Money In The Bear Market – Can It Still Be Done?

There must be many Board meetings when examining the company share price the Directors must simply shake their heads. How can the share price be so low? when we have the right strategic plan and we are implementing the actions? How can it be slow low when we have good cash flow? How can it be so low when we are have quality customers?

Unfortunately companies like these that are listed on the stock exchange have been taking a hammering no matter what industry they are in. However, it could be said that such companies with robust balance sheets and strong cash flows will emerge in an advantageous position in the coming months and years. Some of their competition may fall by the wayside and this can could provide fertile ground for additonal revenues and profits.

Whilst it takes a certain amount of bravery (some risk adverse persons would say stupidity) to enter the stockmarket over the next month there are bargains to be purchased. Just think about this for a moment - if fuel or groceries or washing machines were 40% cheaper than the year before everyone would be running to the store to grab these bargains. Stocks can be regarded in the same fashion.

However, it is a couragous act especially when the volatilitiy of the market has been many a loss in equity. Nevertheless, there is money to be made as long as you are patient and do not gather an immediate high return.

To add another factor into the financial equation is that nearly all western economies are in, will be, or will be close to recession. This may affect company profit margins and the wider market in many ways. The climb to recovery is likely to be slow.
The Australian economy and market looks particularly well placed for two reasons. Firstly its banks have been generally conservative and have not taken a high percentage of risky loans and that Australia could be crudely regarded as a big quarry providing valuable raw materials for the strong economies of China and Asian countries. As a result certain low risk and currently low priced stocks from Australia could be valuable long term assets.

It must be noted that there have been several stocks that have performed well up to 2007 but have taken a dive in 2008 but could be on the slow climb in 2009. The additon of these stocks or mutual funds with a strong track record could also be worthwhile in your portfolio. An example is the Atlantis China Fund which is coordinated by Atlantis Investment Management who are based in Dublin. Until late November 2007 it had been making very strong gains of over 60% per annum. However this Fund has leaked a hurtful 55% loss in 2008. However, in the good times it had been making about 8-10% per month! The fund has made 260% just under 6 years (this includes the 55% drop).

Whilst it could be argued that the funds similar to this one are unlikely to regain to those levels in the immediate term it is certianly a Fund I will be investigating further. A key reason for this is that the fund invests in building materials, gold mining, oil and foods which are all key ingredients of China’s growth.

It should be noted in the time of 55% losses there are still some stocks and funds that have actually INCREASED in value. These are generally inverse funds as well as other funds who have managers that read the market extremely carefully.
Overall, whilst the market is down there are some very cheap stocks and funds available that could / will provide solid gains over the coming years and now is the best time to invest. However, remember to hold your nerve as the market is not going to have a steady climb. Have patience and think long term.