Focus on Assets Over Earnings

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I am forcing myself to look for signs of a recovery every day. One thing I've been focusing on is what worked in past bleak economic times. There were investors who did very well, for example, throughout the 1970s. The key seems to be focusing on assets.

Do not tell me about earnings right now -- I do not care and neither does the market. National Oilwell Varco (NOV) had a great earnings report and the stock was hammered. Given the state of the economy, anyone who issues an earnings forecast and uses it to value stocks is living in a dream world. It will be impossible to predict economic activity and earnings for several quarters.

I want to buy assets on the cheap right now. Give me a pile of bricks, mortar, metal or, best of all, cash that I can buy at a discount-to-appraised value. Even if a building goes down another 25% from current levels, if I paid 70% of current value in the first place, I am probably OK. When a recovery does begin, there will be a scramble to buy cheap assets to fuel future growth and I want to be sitting here with a pile of them to sell.

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My asset stocks are not going to cause me to lose much sleep. Since I avoid debt-laden companies, my only concern is that they use assets improperly or sell them at ridiculous prices. Even in a bad economy, stocks like Adaptec (ADPT) and Sycamore Networks (SCMR) that sell for cash balances are worth more than the current stock price.

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