I'm Going to Blow the 'Lid' Off This Investing Secret, Great Stock

I woke up on Tuesday morning, to see a headline screaming, Asset allocators are the most underweight equities since October of 2005. The typical investor would see that as extremely negative toward stock ownership. Why else would expert money mangers be so underweight equities? The article, however, never asked the obvious question: Were they correct in their assessment the last time that happened? To check that out, I put a chart of the S&P 500 ETF right below the chart indicating exceptionally low equity allocations. How did the broader market do after October of 2005, the last time the experts felt this scared to own stocks? As it turned out, October 2005 was a terrific buying opportunity. Shares raced higher almost immediately. Six months from that October 2005 nadir, the Nasdaq was up about 12% and the S&P 500 had risen greater than 8%. By early April of 2006, the Nasdaq had gained 14% and the S&P 500 ETF was up a tad more than 10%. Author and columnist Walter Deemer is a smart guy. He put together some of his greatest stock market thoughts in the aptly titled, When the time comes to buy, you won't want to. He is correct, based on how typical traders react to large selloffs. Professionals are not immune to the group think that takes over when stocks have been pummeled. Financial Planning magazine, a tool for financial advisers, shows us the average equity allocations by their members over the course of the trailing 12 months. Keep in mind that classic financial planning usually allocates between stocks, bonds, cash, precious metals, and real estate (via REITs, or real estate investment trusts). Stock market allocations rarely break above 65%. Stocks hit an all-time peak in November of 2021 on the back of huge fiscal stimulus and child tax credits distributed to the public. High share prices got those advisers and their clients excited about the recent gains they had made. Equity allocation rose to almost 63%. As shares cooled off the allocation gradually dropped to just 48.5% as the market bottomed in February of 2022. A quick rebound as April rolled around then saw advisers' stock allocations tick up to 54.5%. Oops. Stocks got knocked back down through mid-June and planners' ratcheted down their equity allocations once again. Did they ever hear the old saying, Buy low and sell high? Apparently not since they continued to do the opposite with their clients' accounts. When the market surged much higher into mid-August those same advisors got enthusiastic about stocks pushing their market allocations up to a new high for 2022, at 65.6%. Markets then went south in a big way. Major averages hit their final yearly bottoms around Oct. 12, 2022. That whipsawed advisers once again. Since then most stocks have moved up nicely. The most beaten-up and unloved names far outperformed the high-quality blue-chip names. Ironically, blue-chips are the stocks most recommended by financial professionals whose main concern is not getting fired rather than maximizing their clients' retirement account balances. Many formerly most-hated stocks are already up 20% to 40% from their dead lows. If you are now convinced that buying low is a good thing, here is an excellent stock choice right now. My newest selection is Ball Corporation . During each of the four years from 2019 through 2022 BALL offered chances to sell at between $81.90 and $102.80. The range of peaks from the most recent three years was $98 to $102.80. As of Tuesday, BALL was about $56.86. That significant discount to the prior years' peaks is not justified, Value Line sees 2022's EPS coming in at $3.30 when fourth-quarter numbers are released in February. That would establish a new profitability record. Ditto for the stock's dividend rate of $0.80 annually. It has never been higher. Since the end of 2018 BALL has seen excellent growth across all major business metrics as shown below. Management also retired around 6.3% of all shares outstanding over the four years. Amazingly, the stock price today is just 14.9% more than exactly four years earlier. EPS increased 155.8%. in that time span and dividends doubled. Shares that are dramatically more valuable than before are on the bargain rack. BALL has rarely traded at as low a valuation as it does today. BALL's price-to-earnings is less than half its typical level. Its current yield is decidedly more generous than usual. Assume only a partial reversion to the mean valuation of 22-times projected 2023 EPS and BALL could easily be back to $88 or so by the end of December. That implies 12-month total return potential of about 56%. My goal is not far-fetched. BALL commanded higher than that during each of the previous three years on fundamentals less robust than what are now in effect. Confirmation of those old highs is also confirmed by Fast Graphs research. Buying shares outright is a great way to play BALL with no limits on upside potential and no present time horizon. Traders with excess buying power in margin accounts might also wish to short naked puts on BALL out to its Jan. 19, 2024 expiration date. Actual pricing on the stock's $55, $60, and $65 strike price puts, with BALL at $56.86, is shown below. Worst-case, forced purchase prices dropped to either $50.00, $51.90 or $54.90, respectively. Future stock market action can never be guaranteed. That said, owning BALL at any of those if exercised levels appears incredibly attractive. Holding BALL at the $51.90 per share break-even on the middle strike would have been a winning opposition for all but about 10-weeks out of the preceding four years. BALL spent most of that time hovering between $65 and $90 per share. Buy some BALL shares, sell some BALL puts, or consider doing both.

I'm Going to Blow the 'Lid' Off This Investing Secret, Great Stock

Sometimes if you want to make money in stocks, you have to bottle up your emotions, especially when the market appears in a 'jam.'

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