Don’t be an April Fool. Be Patient
March 31st marked the end of a successful quarter for (long) investors and mutual funds. This was one of the best quarters in recent times considering that the Dow and S&P 500 were up over 3.5% and Nasdaq was up over 6%. But the biggest gainer of all was the Russell 2000 small cap index – up a whopping 13.7%.
Now that the fundies have made some dough in the early part of the year, I expect some pull backs. Not only do they want to preserve their gains, remember they are often rated and paid based on their percentage quarterly gains. So expect some selling, specially in the stronger names that have performed well, and a rotation into some underperforming stocks. If you are thinking of buying stocks from that tax refund, hold off for better, lower prices. One thing that I will add here is that usually, when markets do well, investors, specially small time investors like us, get overzealous, and start boasting to friends (ever so subtly) about the money we are making. That is always a sign to take profits. However, this quarter, specially March has seen a very quite bull and I am not hearing the excited chatter that is typical of overbought conditions. So there might still be legs to this rally, but if you are not in yet, I would be careful.
If you must buy, look at Apple (AAPL), True Religion (TRLG) and Ceradyne (CRDN). These stocks are at or near their 50-day averages and carry little or no downside risk.
- Faisal Laljee
