Value Investing / Main Index / previous / next

September, 2001


With recent attacks on our shores in the heart of our commercial and financial centers, the stock market closed down for several days, war rhetoric rampant, talk of imminent recession or worse, and Congress in a mood to spend money we do not have with patriotic fervor, it is very tempting today (9/15/01) to try market timing.

Surely now it can be certain that the stock market will go down and that airline stocks in particular will plummet almost as fast as did the Twin Towers of the NY World Trade Center. It must be obvious too that defense industry stocks will do well in this kind of environment. But attempting to correctly guess the direction of markets is almost always, sooner or later, a fool's errand. The gains one may make in even a series of correct guesses are often more than offset by losses when one is wrong.

In this case, Americans and others could rally to the cause of stocks, buying to bolster them now in a spirit of patriotism, much as, in World War II, we were encouraged to buy bonds to help our nation. While that seems unlikely, the truth is one almost never knows ahead of time just what "Mr. Market" will do and why. Even airline stocks are not a sure bet to fall. Congress is earmarking billions of dollars to assist them. Maybe they will rally on this news instead.

As for the defense industry, it could still take some time before new expenditures lead to real profits. And what happens when everyone fully realizes that there will be no quick fix for terrorism? We cannot in one massive raid rid the world of evil.

Successful market timing requires knowing not only when to buy but also just when to sell, a dicey question. Overall, few ever manage sustained profits in this way.

By contrast, many have seen moderate investments grow to real wealth through purchase of carefully selected shares in good businesses, held for the long haul. If now seems a little too risky a time for investing, market volatility being what it is during national crises, then consider dollar-cost-averaging, buying equal dollar amounts of shares in good companies or mutual funds at regular intervals over time. One thus buys more shares when the market is low, fewer when it is high, with an almost automatic benefit: lower average cost per share.

Here is a mutual fund plus four stocks that seem worthwhile to consider for such an investment program. They are all potential investments recently recommended by successful money managers or investment services as having good value for their current price or, in the case of the mutual fund, as being run so as to keep risks low, the potential gains high, and the costs reasonable.

Weitz Partners Value Fund (WPVLX) is available through such discount mutual fund brokerage supermarkets as Charles Schwab for an initial investment of $2500 ($25,000 for the private investor not using such mutual fund supermarkets). There is no sales or redemption fee. Total annual fund operating expenses are 1.13%. Since inception ( 6/1/83), through 6/30/01, its average annual total return has been 18.4% vs. 15.9% for the Standard and Poor's 500 Index. Over the past ten years, through 6/30/01, the comparison is even better: 22.0% vs. 17.4%, respectively.

Sys. 'A'
Recent Price$50.61$46.39$10.50$50.47
Safety RankAbove AverageBelow AverageAverageAbove Average
(P/E) Ratio
Earnings per Share
Next Yr. vs. 2001
(deficit in 2001)
(deficit in 2001)
3-5 Yr. Projected
Annual Return on
Shareholder Equity

If one purchases equal amounts of each of the four stocks suggested, overall portfolio risk should be lower than for the market as a whole, but with greater appreciation potential. While there are no guarantees, the long-term investor stands an excellent chance to have his or her money at least doubled over a three-to-five year period.


Larry is not a professional. Don't take him seriously!

Actually, the investment article provided here is for general information only and should not be considered as professional advice, a solicitation to buy or sell any security, or the Word of God. Investors are encouraged to do their own research while considering their personal goals and circumstances, or consult their own professional financial advisors, before making investment decisions. Neither Larry nor LARVALBUG will be liable for any losses sustained by any visitor to this site.

(Disclosure statement: Larry and Val have holdings in some of the suggested assets but do not "make a market" in any of them and do not derive any direct benefit from recommending them, except perhaps for a bit of smug self-satisfaction.)

Value Investing / Main Index / previous / next