Ever hear the phrase, “everything old is new again.” Well, that’s why I’ve been acquiring Wal-Mart (WMT) in the low $60s for many of my clients. Can’t compete with Amazon, you say? I say that a dividend aristocrat with a 3%-plus yield is paying me to be patient. And what’s wrong with paying 2012 prices while we wait?
Ditto for Hess Corp (HES). I realize that the doom-n-gloom on the commodity has been “spot on.” That said, the U.S. and the global community still depend on oil; that is, whether people around the world are using it for power or a country requires exporting the commodity for its survival, “black gold” will stage a comeback. It follows that an old-timer like Hess Corp (HES) trading at 2012 prices at less than 1x book (P/B 0.75) is worthy of consideration, especially with its 1.8% dividend yield.
Don’t get me wrong. I expect U.S. equities to retest their late August lows. And I would not be surprised to see the corrective activity break to bearish levels of 20% below all time records. The vast majority of the 15 warning signs that I outlined prior to the August-September sell-off are still in play.
Still, there’s nothing wrong with having a “buy lower” value orientation. If a 33% discount on WMT stock is not enough protection, you might choose a stop-limit order to keep a loss manageable. If you fear $30 oil and worry that HES won’t be able to stand the heat, consider dollar cost averaging into a diversified sector ETF like iShares Energy (IYE).
The one thing that you shouldn’t do? Join the biotech bandwagon or the Internet parade without a plan to step aside. Only 15% of S&P 500 stocks are trading above a 50-day moving average. Market breadth this weak tends to beget more selling pressure. Equally disconcerting? The American Association of Individual Investors (AAII) has investor bullishness at a 2-month high of 34.7%. Historically, you will get a whole lot more folks throwing up the white surrender flag before a corrective phase finishes.
Gary Gordon is president of Pacific Park Financial, Inc.