Did you just say "bull market"? Now? In the face of the biggest, snarliest bear since the Nasdaq dropped 80% between 2000 and 2002?
Yes ... and not just one bull market, but many. They're coming.
Bulls and trying times
There's a reason why you should be thinking about the next bull market, even during these periods of intense volatility: Today's inefficiencies are creating tomorrow's opportunities. See, right now, almost every media outlet and source that investors look to for guidance is either relentlessly negative or hopelessly out of touch. Efficient markets, on the other hand, require participants to think independently. But when the markets become volatile like they are now, most participants seem to think the exact same thing: "Holy crap!"
If you look at the business headlines from the past two months, you'll find that they essentially say exactly that.
This makes sense. Global stock markets tend to move more closely together whenever they're more volatile. There's not much underlying reason for this, except that "holy crap!" translates really neatly into dozens of different languages, whereas "on a return on invested capital basis, Apple
I'm sorry, did you say the market was going up?
Now, I don't know when the market will go up. What's more, current economic conditions, such as the correction in the formerly overextended housing market, offer significant headwinds. I'll be the first to admit that there's not much difference between "early" and "wrong."
But just because the stock market might not go up doesn't mean that there aren't sectors where demand is destined to increase, in ways that investors are underestimating. For example, does it not make sense that the upcoming economic stimulus package ought to be a boon for credit card companies such as American Express
Find more bull markets
But finding bull markets isn't necessarily about binary events. It comes from thinking about where demand functions will increase in ways that the market hasn't foreseen. You know how every financial show seems to have something about the great agricultural bull market, and inevitably includes Potash Corp. of Saskatchewan
Looking for others? What about Cresud, a giant land owner in Argentina? Or what about hidden agricultural company DuPont
You have to be right about both parts of the equation: the demand, and whether others are thinking about it. Witness the destruction that's taken place among ethanol companies such as VeraSun Energy
Looking in industries with temporary investor despair is another way to uncover the next bull market. Ethanol companies, for example, are generally much better prospects now than they were when they were all over the media. As are the oil and gas drillers, by the way.
Several companies have been smoked in the aftermath of Schlumberger's
But where to find such things?
Here's the bottom line: The recent turmoil, particularly in the small-cap market, has created more attractive opportunities for investors than I've seen in years. Our team at Motley Fool Hidden Gems is working to identify exactly those opportunities for our subscribers.
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Bill Mann is the advisor for the Hidden Gems small-cap newsletter. He's also a Pisces, which probably has something to do with his magical ability to misplace his keys. He owns none of the companies mentioned in this article. Cresud is a Global Gains recommendation. The Fool has a disclosure policy.
