Today is the first day that the markets are open for 2006, and for many investors and companies, it's an opportunity to begin anew. For example, my New Year's resolution is to get in shape. I need to get my rear to the gym tomorrow, and three days a week every week, in hopes of shedding 10 pounds, or at least keep this pesky weight gain in check.
Ahh, but unfortunately, things like competition, economic cycles, and investor psychology don't operate on our nice, neat solar calendar. Nor do they follow companies' fiscal calendars. The result is that some companies are not starting 2006 on an optimistic note. In fact, a number of companies have started off the year by trading at prices lower than they have in the past year. Are any of these laggard stocks a buy? The trick to successful investing is separating the companies that have temporary problems and cycles from those that have long-term competitive problems. I've selected the stocks of five companies off today's low list to see which of these two categories they belong in.
Motley Fool Income Investor
selection H.J. Heinz
Pier 1 Imports
Chicken producers Pilgrim's Pride
None of these companies are a slam dunk to turn things around in the near term, but I think Heinz, Sanderson Farms, and Pilgrims Pride will eventually recover, while the competitive forces for Comcast and, to a greater extent Pier 1, look harder to overcome. However, none of them is in danger of going out of business any time soon, and history shows that buying the beaten-up and downtrodden often beats buying the high flyers in the long term, particularly if there is a substantial dividend yield in place, as well. In fact, that's the very strategy that John Neff used to post 30 years of market-beating performance at the Windsor Fund.
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