This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Putting Some Chips Back on the Table

My last column in July espoused selling stocks and playing poker. This column advocates the opposite. Enough stocks have dropped significantly to low valuations and with decent fundamentals to trigger new buying in my portfolio. But before you get all lathered up and label me a raging bull, let me explain.

I use a formal low-P/E investment discipline that permits buying stocks only in companies that are down and cheap. When the buy list is laden with undervalued stocks in average companies that have suffered meaningful declines, I build up the long side of my book. When the list is meager, I tend to take profits.

In July, the list was skimpy, and I reduced equity exposure. However, today it's replete with good companies at low valuations. Therefore, I am buying. In the investment business we call this a "bottoms-up" process.

I am not a rip-snorting bull. Large fundamental issues concern me enough that I avoid any significant margined long position. Interest rates continue to rise, real estate is tapering, cost pressures continue to increase, and consumption (and hence economic activity) appears due for a rest. And stock market valuations in general, while much better than at the beginning of this year, are hardly cheap.

But I simply cannot ignore what my new purchase list is suggesting. And that is to add stocks to my portfolio. Which stocks?

Some of the old favorites have pulled back enough to become excellent values, ConocoPhillips (COP - Get Report) for example. At Thursday's close of $60.90, the shares trade for about 6 times this year's earnings, with excellent exposure to higher commodity prices and refining margins.

While the company may be 10 times "normal" profits (if we ever get "normal" oil/gas prices correct again), that's still way too cheap in a 16 P/E market! I believe the stock is discounting oil in the $35-$38 range. Conoco is still one of the best growth stories in the sector when comparing its strong revenue/profit growth with its compelling valuation. My price target is at least 30% higher. If I could own only one oil stock...
1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
COP $32.90 0.00%
EMN $60.66 0.00%
HD $116.32 0.00%
PHM $16.01 0.00%
TEX $20.54 0.00%


Chart of I:DJI
DOW 15,973.84 +313.66 2.00%
S&P 500 1,864.78 +35.70 1.95%
NASDAQ 4,337.5120 +70.6750 1.66%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs