Now Is the Time

A few weeks ago, many of my fellow analysts from the Rule Breakers stock-picking team met with the movers and shakers of Silicon Valley. They rolled up their sleeves, asked key executives all of the hard questions, and reported back to the growing community of Rule Breakers newsletter subscribers. They visited some of the more dynamic publicly traded companies, and knocked on the doors of the rapidly growing, privately held upstarts that will undoubtedly spark the Valley's next wave of successful IPOs.

I'm telling you what they're doing to illustrate what they are not doing. They aren't pitying themselves over the roughly 40% plunge in the major market indices over the past year. They aren't curling into a fetal position because the country's financial system is in disarray, nor because the newsletter service's scorecard is getting smacked around.

They're doing the right thing: Using their minds when the rest of the market is losing its mind.

Move in for the big moment
Now is the time, my friend.

Time to buy? Are you nuts? How am I supposed to know that? I can't tell you whether the market is going to plunge another 10%, 20%, or even 30%. No one can. However, I can tell you that if you spend these next few hours, days, and weeks researching the companies that will bounce back the strongest when the market does turn around -- and it will -- you won't just beat the market. You will obliterate the market.

Now is the time ... to think.

The easiest way to beat the market
Investors tend to throw the baby out with the bathwater. A bad earnings report or a sector wrinkle can send the entire market for a dip, even though many of the roughed-up stocks are perfectly fine.

Struggling companies continue to dominate news coverage, with eager commentators debating their solvency. But in avoiding those troubled businesses, you don't want to look for stocks that are just staying intact during the downfall. You want to find companies that are improving during the deluge.

How can you do that? Simply collect the names of companies on which analysts are jacking up forward earnings estimates, at a time when the general market is being talked down.

You probably didn't expect a whole lot of optimism out there in a nervous market, but there is some to be found. In fact, here are seven stocks for which market watchers have raised their fiscal 2009 profit targets:

Fiscal 2009 EPS Estimate

Source: Yahoo! Finance.

That's an eclectic -- if not entirely unexpected -- collection, is it not? Shanda and Sohu are picking up steam in China, a stock market that has taken even harder blows than our own. Poke around many of the other sectors, and you won't find too many footwear makers, computer builders, for-profit educators, energy-drink specialists, and animation studios with improving fundamentals.

This list should be an eye-opener: Even in this cascading stream of a market, there are salmon fighting the rush to head upstream and slip past the hungry bears. That's why I'm looking. It's why my friends went knocking. And it's why you should be joining us, if not as members, then at least as believers that now is the best time ever to bone up on market research.

Opportunity is knocking. You don't have to swing the door open right away. In fact, you probably shouldn't. Take the time to look through the peephole. Relish the joy of knowing what others don't. Be on the lookout for companies with improving fundamentals, and add them to the list.

If you'd like to use our research as a starting point, you can read our dispatches from our Silicon Valley interviews and take a peek at our favorite stock selections for new money now. Just click here for your 30-day free guest pass to our Rule Breakers stock research.

This article was originally published on Oct. 20, 2008. It has been updated.

Longtime Fool contributor and Rule Breakers analyst Rick Munarriz owns shares in DreamWorks Animation. Shanda is a Motley Fool Rule Breakers selection. DreamWorks Animation is a Motley Fool Stock Advisor pick. The Fool has a disclosure policy.