Wealth Within - All Ords Report 1 July 2008
There is a long held view that by taking a contrarian view to investing, investors can profit. In essence this is what the professionals do as they buy shares in good companies when no one wants them and then they sell them when the market has peaked. Historically the amateur investor does the opposite and in so doing reduces the ability of their portfolio to generate good returns.
In the current market conditions, many companies have been oversold as investors sell out through fear of losing, with many companies trading at prices well below their true value. The professional investor knows that this presents great opportunity for long-term gains and in our market these opportunities are likely to come from the energy, resources, healthcare and materials sector.
So what can we expect in the market?
In past reports I have mentioned that the market has periodically been unfolding in an erratic and unpredictable manner during the last 12 months and once again we find ourselves in another period of unpredictability, given that my analysis indicated the All Ordinaries Index would find support in the last week and start to rise. However, it subsequently fell away, which means we are now in uncharted waters given that at no time in history has the All Ordinaries Index fallen more than 10% three times in less than 12 months.
What is occurring now is that many investors are getting caught trying to pick up bargains only to find the stocks fall away further, which supports my view that investors still need to exercise caution, to only invest in quality shares and above all protect capital by using stop losses.
While there are signs that the market should have risen over the past two weeks, this was eroded when the market fell heavily last week. I still believe we are close to the bottom of this down move and that the market will rise strongly in the second half of 2008. Therefore right now patience is the key as many opportunities will present when the market does turn.
Until next time
Good luck and profitable trading.
Dale Gillham
Chief Analyst