If This Isn't a Great Time to Buy ...

I know a lot of you have been staring at the ticker feed on TV, watching stock after stock tumble during this market swoon. And yet ... you haven't bought anything. Why?

I have a question for you: If now isn't a great time to buy stocks, when would be? After all, many great names have been cut in half or more. Often we get excited when something is 10% off, or when we find a 20%-off sale. But folks -- Caterpillar (NYSE: CAT  ) is down nearly 50% so far this year! Legg Mason (NYSE: LM  ) has had its value slashed by almost three-quarters!

Check out how some well-regarded companies' stocks have fared over the past year:

Company

1-Year Return

Time Warner (NYSE: TWX  )

(45%)

Caterpillar

(48%)

American Express (NYSE: AXP  )

(54%)

KLA-Tencor (Nasdaq: KLAC  )

(58%)

Graco (NYSE: GGG  )

(39%)

Disney (NYSE: DIS  )

(31%)

Legg Mason

(74%)

Data: Morningstar.com.

Those are all negative returns. Are you waiting for stocks to be down 98%? I don't think that will happen. And if it does, that might not be a great time to buy, as something might be terribly wrong. So why aren't you buying now?

Think back a couple of years, when the market was really cooking. If it suddenly dropped, say, 10% in a short period, many of us might have been licking our lips, searching for bargains. They might have been a little hard to find, but there would likely have been some. But it's different now. Gobs of blue chips are gasping for air, trading at bargain-level prices.

What to do
Review your watch list, and see which of the companies that interest you are most compelling at the moment. (Remember that you want to not only see them trading at significant discounts to their intrinsic values, but also with sustainable competitive advantages, healthy balance sheets, smart managements, impressive track records, and strong growth prospects.) You don't have to sink all your cash into stocks now, but think about investing some or all of what you won't need for five or more years.

Consider investing in steady dividend payers. For recommendations, you can take a free test-drive of our Motley Fool Income Investor newsletter, featuring many firms with dividend yields above 6%.

Here are some of my colleagues' thoughts on the attractiveness of our current market:

Longtime Fool contributor Selena Maranjian owns shares of Time Warner. Legg Mason and American Express are Motley Fool Inside Value selections. Disney is a Motley Fool Stock Advisor pick. The Fool owns shares of Legg Mason and American Express. Try any of the Fool's market-beating investing newsletters free for 30 days. The Motley Fool is Fools writing for Fools.


Read/Post Comments (4) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 07, 2008, at 12:29 PM, babycondor wrote:

    Sounds like a desperate attempt to get people into the market. But it will take time for people's trust and appetite for risk to be restored. I'm a buy-and-hold investor (one of my holdings is DIS) nearing retirement and have watched my portfolio drop 50% in the last year.

    I admit to being tempted, but every time I start to consider investing new money, I remember how much it hurts to see it evaporate. I am not selling, but neither am I buying, for a long, long time.

  • Report this Comment On November 07, 2008, at 11:03 PM, SteveTheInvestor wrote:

    I tend to agree with you BabyCondor. I'm 5 years from retirement myself (I hope). I'm down about 20% from peak value because I started moving to cash last year. If I had bought all the stocks that were supposedly "on sale" over the last year, I would be down a lot more than 20%.

    Personal wealth has evaporated to a great extent. That's mostly because it never really existed in many cases and was instead created by absurdly inflated housing values and over-use of credit. These people aren't spending money anymore. I think that will keep the economy depressed for at least a year. And companies like AXP still don't know how large of a hit they will take on credit card defaults.

    A lot of these stocks are down big because they should be. The hard part is trying to figure out which ones are down big but don't deserve to be. So.... I guess we first have to figure out when the damage from government apathy, corporate greed/stupidity and excessive consumerism will be complete. Then we can make an attempt to determine "intrinsic value". Until then, I with you and am not buying much either.

  • Report this Comment On November 08, 2008, at 2:15 AM, blary54 wrote:

    Im 26...and i think that is a great time for me to invest! But...I have a few years left until retirement.

  • Report this Comment On November 08, 2008, at 5:42 PM, biotechmgr wrote:

    I understand a writer needs to write to get paid and do their job properly. I fear that articles such as these are irresponsible to less experienced investors. In fairness, this writer is not the only one putting out such pieces.

    The standard investing mantras - buy the dips, invest for the long term, diversify - must go away as this is a dangerous time in the economy. This is a bear market. This may turn out to be the biggest bear market ever. An objective piece should discuss the pros and cons of investing in a bear market. A least Jim Cramer admitted as much, saying that if you need money in the next 5 years, take it out of stocks. T-Bills have outperformed the SP500 over the past 10 years.

    A writer writes to make a point using the data one wishes to use. I suppose that their job would be over if they wrote one dissertation on what is happening and left it at that.

    But it is a disservice to people who are losing money and could be sucked in to the next bear market rally, only to be crushed in the next sell off. If a person stays in cash for the next 2 or 3 years, what is the harm? If we are having a recession, or worse, cash becomes worth more as prices decline.

    I don't need to recapitulate everything that has transpired since July 2007 to remind anyone that these are dangerous financial and economic times. A bull market is not going to be born from such an infertile womb.

    What is my leg to stand on? I have earned 106% this year in my IRA trading leveraged short vehicles and options. With the data I see, I expect to make over 100% per year this way until this depression has concluded.

    I feel for those who are getting killed in this market. I wish I could help them. I also wish these feel good about the market pieces would go away and not sucker people in. Yes, there will be a bear rally. But when to buy? And will people know when to sell?

    People, take care. You will be shocked to see the depths plumbed by the coming depression.

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