Fribble How to Kill a Bear

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By Noo Noo (
May 16, 2001

So you have been riding the komatik of the markets under a blue sky and with your lead husky Nortel (NYSE: NT), or was it JDS Uniphase (Nasdaq: JDSU), or some other stock? Well never mind, because you were making good time as your team of stocks pulled your portfolio north. Now you have come across your first bear. His white coat made him hard to see and now you are upon him and are far too close for comfort. What do you do?

Well what would an expert do? Oh, to have an Inuit guide now. Let's look at what such a guide would do.

Sacrifice the Dogs
When coming upon a bear, an Inuit would select a number of dogs and let them loose. This keeps the bear busy and gives him more time to think. What you need to do is to take a hard look at your portfolio. Not only should you weed out any weak stock, such as those that will need additional financing in the next six months to survive, but also look at your over-all portfolio. Ask yourself if your portfolio is over-weighted in a particular industry or if you are holding too many speculative stocks. Let loose your dogs.

Look for a Weapon
The Inuit now has time to look in his komatik for a weapon. A gun would be nice but there are no silver bullets, so he must make do with something sturdy. Now that you raised some money by selling the dogs, you must now search the market komatik for a sturdy stock or stocks in which to invest. What you are looking for is a well-managed company selling at a good price. But most of all it should have lots of cash and a good cash flow. The cash will not only be needed to see it through this economic downturn; it can also be used to gain a competitive advantage. By being able to continue product development and to take advantage of the depressed stock prices to buy out its competitors, a company with cash now is more likely to emerge stronger down the road.

Strike a Firm Blow
Now that he has a weapon, the Inuit will sneak up from behind the bear and strike a firm blow. You must also take your time buying the stocks you choose. There is no rush. If the price is not right, wait. In fact, it is helpful to have a number of stocks chosen as potential candidates and to pick the best based on price and risk. You must also strike a firm blow and avoid buying on margin. Remember the bear might not die right away and you might have to run to get more money for a margin call to avoid getting mauled.

Stand Back and Wait
Once the death blow has been struck, the Inuit stands back and waits for the bear to die. After it dies, he loads it aboard his komatik and takes his trophy home. After striking the firm blow, there is nothing to do but to sit back and wait. The bear will eventually die -- of old age if nothing else. The trick of course is to make a trophy out of this bear market by trading your old, tired dogs for strong fresh pups to chase the next bull as soon as he leaves his stall to charge north.

Fool on, Eh!