Bet on the Horse and the Jockey
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One has to wonder if valuations really matter anymore. Mr. Market doesn't seem to care about whether a stock is trading at a P/E of 10, 7 or 4. If earnings continue to drop off a cliff, a price to earnings ratio doesn't do investors any good at all.
Yet fundamentals do ultimately matter. A company that can navigate through this environment with a lean operating structure and a strong balance sheet has a very good shot of surviving the storm. And as businesses shut down due to the difficult economy, those that endure could find themselves among a handful of participants in a particular industry.
However, fundamentals alone should no longer be enough for investors. Now more than ever, investors need to focus on the jockey steering the horse. This combination offers the greatest probability of not only getting through this economic catastrophe, but also a high chance of future stock price recovery.
(LUK) is a quality horse and jockey bet. Chairman Ian Cumming owns nearly 10% of the shares.
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