Here's Hoping for Some More Selloffs

 | Jan 26, 2014 | 4:00 PM EST  | Comments
  • Comment
  • Print Print
  • Print
Stock quotes in this article:

gm

,

ebay

,

aapl

,

t

,

jcp

,

bby

When the market plunged Friday -- with losses of around 2% for all three major indices -- I got excited. In fact, I would hope for more sessions like this next week.

Before you write me off as a traitor, understand the most fundamental law of investing: The price you pay determines the money you'll make when you close the deal. The best time to pick up stocks, then, is when prices are heading down -- so, particularly for value investors, days like Friday are what get the juices flowing.

General Motors (GM), for instance, sank some 4% to around $37 Friday, bringing its total year-to-date loss to 10%. If you manage to bag this one -- preferably under $30 -- you'll be buying an asset that could be worth $50 or more in a couple years thanks to a streamlined manufacturing process, generally rising new-auto sales and the government's recent sale of its last GM shares, among other things.

eBay (EBAY), too, is on the radar screen now that activist investor Carl Icahn is asking the company to spin off is its crown jewel payment-processing unit, PayPal. While Icahn currently owns just a small percentage of the company, he has publicly told eBay that he is prepared for a proxy fight if necessary.

Icahn also recently added another $500 million to his stake in Apple (AAPL), and he has begun to publicly complain about the company's failure to buy back more shares.

Away from this, when we see big market declines like that of Friday, they also create opportunity to grab incredible dividend yields. The AT&T (T) payout currently yields at 5.5% -- but it may breach 6% if the market corrects by another 10%. These strong dividend payers also tend to better withstand selloffs because, as the yield simultaneously ticks upward, the stock tends to develop more underlying technical support.

For the bottom-fishers out there, there's J.C. Penney (JCP), a stock that continues to test limits. As of its Friday close at $6.70, shares are worth 65% less than year-ago levels. The lessons of struggling retailers should not be ignored: Very few make it back to the good old days. Just look at RadioShack (RSH), Sears (SHLD) -- and, most recently, Best Buy (BBY), whose massive 2013 share comeback took a major blow earlier this month on dour holiday-season numbers.

That said, J.C. Penney in particular has real estate and the stock trades at 80% of book value. If the shares were to reach 50% of book, the price might be right.

Yes, human nature desires action. Nothing is more difficult than doing nothing. French mathematician Blaise Pascal once wisely observed that man's misery comes from his inability to sit in a room alone, and that's especially true when it comes to investing. But if you sit still long enough, Mr. Market will bring the prices to you.

Columnist Conversations

Conclusion This is a very quick note to visualize the solar stock peer group. I'll do some individual stories ...
Conclusion SSYS is one of two giants in the 3-D printing arena and is reporting earnings on November 5th, afte...
Market continues to hold onto impressive gains in the last day of a roller coaster trading month. This month ...
UPS is bumping up against a very heavy layer of resistance today. The stock's 1.6% gain has pushed shar...

BEST IDEAS

REAL MONEY'S BEST IDEAS

Columnist Tweets

BROKERAGE PARTNERS

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.


TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.