The funny thing about pessimism is that once it takes hold, people assume that it will last forever. This makes sense if you take it from a psychological perspective.
Depression is a horrible disease that afflicts many. Those who suffer often feel as if the sadness will never end. Unless one is severely ill, however, most depressions almost always lift to be replaced by rays of optimism.
Funny, but the market as a living entity exhibits the same human tendencies. Pessimism and depression seem to never end, except that they almost always do.
Think about it for a second. Even the most horrible of financial crises and negative economic circumstances are ultimately resolved, markets recover and prosperity returns.
In my mind, the best investors recognize these human traits and more importantly are able to keep an even-keel no matter the situation. You know the type; they are tough to get a rise out of any situation.
Absolutely nothing shakes them.
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We have one of those personalities in our stable here at InvestorPlace, and his name is Richard Band. Richard’s even keel style of investing has resulted in a stellar record for his Profitable Investing subscribers over a long period of time.
He has been around for a long time, and he has seen it all.
I have a sense that he is not fazed in the least by the current situation. As such, I thought it would be a great time to peruse his Model Portfolio in search of an idea that should do well once this pessimistic fog lifts.
Sure enough, there were many recommendations that caught my eye. The one that stood out the most for me was Target (TGT).
Maybe that’s a function of great minds thinking alike. You see Target (TGT) was a Rational Investor model portfolio selection, and I am still a big fan of the company.
As one might expect, TGT has suffered as the near-term condition of the economy deteriorated. The consumer’s struggles have resulted in across-the-board selling of retail stocks. In a true sign of depression, many investors have sold fearing that weakness will never end.
That’s a big mistake that Profitable Investors can take advantage of!
I’ve previously discussed how easy money can be had by owning shares of companies that trade for earnings multiples that were less than its growth rate (see my March 18th article, “Ride the Rails to Safety“). Well, the market has taken TGT to such a level and beyond.
Richard has this one dead-on. In his opinion TGT will resume its upwardly trend when consumer incomes pick up again.
Did you catch that? He says TGT will do well when incomes pick up again. That’s right, incomes will pick up again.
This depression will end eventually, and when it does, you should have TGT in your portfolio. Shares are a bargain at these depressed levels.
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