Julie Jason: The right places to look for stocks.
If you have been following the stock market, I’m sure you are aware that the market is in bear territory. The Dow Jones Industrial Average closed at 18,592 on March 23, 2020, a 30 percent-plus decline from its peak of 29,551 on Feb. 12, 2020. (The S&P 500 index peaked on Feb. 19, 2020.)
Since March 23, the Dow has made dramatic daily moves, ranging from a massive climb of 11.4 percent on Tuesday, March 24, one of the best on record since the 1920s, to declines of 4.1 percent (March 27) and 4.4 percent (April 1), followed by another big up day of 7.7 percent on Monday, April 6.
Looking back from today, the Dow has regained more than one-half of the decline that occurred following its peak of Feb. 12.
The question is, when we get to May or June and look back, what will we see in the rearview mirror?
Your guess is as good as mine. However, there is no doubt that the markets are moving — fast — and since March 23, the general direction is currently up.
So, what are your current plans? Are you in a position to start buying again? Should you?
Professional investors are watching for opportunities that a beaten-down market offers. Some with a penchant for risk are buying with conviction; others are buying small amounts over time or are avoiding the risk altogether.
If you are an individual investor or a 401(k) participant without professional guidance, and you are a buyer, there are resources available to help you find stocks for this market. Over the next few weeks, let’s review a few of them, so that you can be comfortable creating a list of stocks or mutual funds that you might want to start acquiring.
Many years ago, when I used to visit the Greenwich, Connecticut, library every Saturday, I read The Value Line Investment Survey. Now that survey is available in electronic form online, making it easy to search for both historical and forward-looking characteristics. The online version also has a wealth of free resources, including a stock screener that you can sample at no cost. Browse the research part of the website with me (research.valueline.com). Click on the Dow 30 tab to see an example of how Value Line presents information.
You’ll find a report for each Dow stock — it’s well worth taking a few minutes to read a few. Some rankings you’ll see in the data table are unique to Value Line, such as “safety” and “financial strength.” They should be helpful to you in assessing whether any of these stocks are “good enough” to put on your watch list. Other terms are defined in the glossary, which is at valueline.com/ Glossary/Glossary.aspx.
Value Line’s “safety” ranking is based on price stability and financial strength. The price stability index measures “a relative ranking of the standard deviation of weekly percent changes in the price of a stock over the past five years.” The index is based on five years of data, which means the recent coronavirus market may not have a great effect on it.
The “financial strength” rating is an assessment of a company’s financial risk, including “balance sheet leverage, business risk, the level and direction of profits, cash flow, earned returns, cash, corporate size and stock price.”
These and other rankings are described in “The Value Line Ranking System,” which you can find online. Explore “tool guides” to become familiar with other resources. “How to Read a Value Line Report” will be most helpful.
If you would like to try the stock screener, let me get you started by sharing a recent conversation I had with Value Line’s director of research, Ian Gendler. I asked him how he would structure a screen for highquality, dividend-paying stocks that could survive and thrive in the difficult economic period that is in our future.
If you are interested in his thoughts and how to structure such a screen, you can follow along here: tinyurl.com/y739d8mv. (You’ll find a free trial to the stock screener there.)
By the way, if this subject of stock and mutual fund research is of interest to you, I’d like to know. Please send me an email (readers@juliejason.com), mentioning the paper you read, what you do and whether you are a selfdirected investor.