So Much for Dow Skeptics

As I mentioned in another previous column, the "factories, equipment and mines" of yesterday's Dow have been replaced by "intangible, intellectual assets." I explained then, "flexible and quick to adapt intellectual assets are also less cyclical companies to own than the boom-and-bust industrial companies of the past." That means that companies like current Dow components Johnson & Johnson (JNJ - commentary - Cramer's Take), 3M (MMM - commentary - Cramer's Take), Wal-Mart (WMT - commentary - Cramer's Take) and American Express (AXP - commentary - Cramer's Take) are not as vulnerable to recession as the industrial companies of a generation ago.

Here, J.L. finishes his email with a final rejoinder to fund managers:

Stock fund managers need to learn shorting ... in order to achieve good returns in the future.

Nonsense. Shorting is very difficult -- much tougher than simply investing on the long side. If you're on the long side, you're betting with the odds: The market is up roughly two out of every three years. If you're short, you have to be right on both valuation and timing. There are also carrying costs of shorting (margin interest and reimbursement of dividends), plus unlimited potential losses.

What's an Investor to Do?

Market seers are a dime a dozen. We'll always have gloom-and-doomers who will cavalierly toss out Dow Jones Industrial Average targets that are frightening -- if you believe them. Consider taking a different tack: Let specific opportunities dictate your equity exposure. Ignore the indices. If you can find compellingly priced businesses that generate lots of free cash, are defensible and have a strong balance sheet, then consider allocating capital to them. If you can't find much in the bargain bin, let cash build up.

For example, I continue to think that small-cap Monaco (MNC - commentary - Cramer's Take), is a stock worth owning, as its business value is well in excess of the stock value. Ethan Allen (ETH - commentary - Cramer's Take), a dominant furniture retailer with a 70-year-old premium brand and a sterling balance sheet to boot, is very undervalued as well.

If you're interested in learning more about the values I'm finding in this market, think about subscribing to TheStreet.com's Value Investor. It's full of investing ideas for you to consider.

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At time of publication, Alsin and/or ACM was long Monaco and Ethan Allen, although holdings can change at any time.

Arne Alsin is the founder and principal of Alsin Capital Management, an Oregon-based investment advisor and portfolio manager of The Turnaround Fund, a no-load mutual fund. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Alsin appreciates your feedback and invites you to send it to [e-mail]. Click here to receive Arne's latest favorite stock picks from his newsletter, TheStreet.com Value Investor.