As I travel around the country speaking to investors at my seminars, I can tell that people are very nervous about the stock market. Wall Street has been experiencing wild swings lately, and no one seems to know when it will end. On top of that, the housing market is still a mess, and more banks are refusing to lend money.
The stock market had another rough week last week. What’s happening is that the market is in the midst of retesting its recent low from January 23. If you recall, this is when the Dow staged its stunning 600-point turnaround, which was basically the financial equivalent of Manning to Tyree.
The stock market often has to go through these retesting phases, so we’re not out of the woods yet. There are lots of bears just waiting for any chance to sell, so don’t let yourself become a victim. For example, after the recent lousy report on non-manufacturing activity, the Dow had its biggest one-day drop in a year.
I view the market’s retest as an incredible buying opportunity for aggressive investors. While my Emerging Growth Buy List is fully exposed to the market at all times, many of my more conservative-minded subscribers told me they had moved into cash reserves to wait out the storm. That’s perfectly fine. After all, I want you to do what’s best for you. However, the storm clouds are now clearing, and if you had moved to cash, I want you to know it’s safe to begin buying again. If you’re a conservative investor, I recommend that you "dollar-cost average" over the next one to two-and-half months to get fully invested. Your objective should be to get fully invested by mid-March to early May. After that, I expect a significant rally leading up to Election Day in November.
The best news for investors came Thursday when Ben Bernanke said that the Fed is ready to cut rates again to help shore up the economy. I expect another 50-point rate cut on March 18, and a 25-point cut at the Fed’s late-April meeting. But until the retest passes, the market is a dangerous place.
The reason why I’m so convinced that a retest is likely is that when the stock market had its big 600-point reversal, the leaders were financials, mortgage insurers and REITs. In other words, the junk floated to the top. I assure you that that wasn’t a real rally, but a short-covering rally. That also explains why hedge funds had their worst month in nearly eight years. Trust me–stocks with massive operating losses and declining earnings can’t lead the market.
Buy Oceaneering International
While we wait for the inevitable retest, the market’s recent woes are very easy to explain. The banking system is basically going though a crisis, and a massive deleveraging of the economy is now under way. The only bright spot that I see is that perhaps the multibillion-dollar write-downs from major banks might get a bit smaller in the upcoming quarters. As a result, the seismic shift out of value into growth should last because the value indices are heavily weighted with financial stocks.
Due to the anchor that financial stocks will have on the market, investors are looking for a silver lining. Well, the silver lining can be found in the heartland of America, from Texas (the "awl bidness") all the way up through the farm belt in the center of the country. In the dismal fourth quarter when GDP only grew by 0.6%, exports soared by over 19%! This was primarily due to strength in aerospace and agriculture, which are being boosted by the weak dollar. The United States is the breadbasket of the world, and we’re the Saudi Arabia of corn and coal. Not only are corn prices near a 12-month high, but coal prices have risen 42% this year while crude oil prices have fallen a bit.
If there’s one company in the sweet spot of the economy right now, it’s Oceaneering International (OII). The company provides engineered services for the offshore oil and gas industry, especially for their deepwater applications. Not only is it based in Houston, where it’s riding the energy boom, but Oceaneering also does a lot of work in defense and aerospace.
Oceaneering International is due to report its earnings tomorrow, Wednesday, morning. Wall Street expects 82 cents a share, which will be a nice increase over the 57 cents it made last year. Honestly, I don’t even want to guess what Oceaneering will make, but I’ve gotten used to being pleasantly surprised by this outfit. I rate Oceaneering International a strong buy for all types of investors up to $65 a share.
This is an especially good time to join us at Emerging Growth because we’ve historically done very well during turbulent markets. In 1991, my Emerging Growth Buy List soared over 83%, and I see many similarities between now and then. You can sign up for a full year of Emerging Growth for $995. Or if you just want a sample, you can get three months for $295. I hope you’ll join us today.
