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3 Investing Ideas As Selling Pressure Rises

Stocks in this article: ATVI BBRY BP IEF TLT

Chris Lau, Kapitall: There is one number to watch as stock markets falter: interest rates. Yields for long and short-term bonds rose steadily since May 2013, pushing the price of US treasury debt lower. The iShares Barclays 20+ Year Treasury Bond Fund (TLT) closed recently at $103.37, down 17.2% from a 52-week high. The iShares Barclays 7-10 Year Treasury Bond Fund (IEF) fared slightly better, down 7.9% and closing at $100.14. Volatility could mean wide price swings in stocks in the near term – markets could move widely as sequestration uncertainty heightens in September 2013. As selling pressure rises, investors should look at specific companies that are deeply discounted, improving their balance sheet, or paying a high dividend.

[Read more from Kapitall: 11 Undervalued Stocks Post-Earnings Season]

US bonds fall

Click on the images below to see prices over time. Sourced from Zacks Investment Research.

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Investing ideas

1. Investors could look at stocks that are trading at distressed levels and deeply discounted from their intrinsic value, such as Blackberry ( BBRY ). Short selling is declining for Blackberry, as the company looks to take itself private. Prem Watsa, a major shareholder in the company, removed himself from the board to remove any conflict of interest.

News that Blackberry’s CEO Thorsten Heins would earn $55.6 million hurt shares last week. Heins reduced the operational costs of the company, led the launch of Blackberry 10, and cancelled further development for the tablet initiative.

2. Vivendi SA finally sold nearly $6 billion worth of shares in Activision (ATVI). When 429 million shares are sold, Vivendi will have a 12% stake in Activision after the deal closes. Activision is raising $4.6 billion in debt to pay Vivendi $5.83 billion. The conglomerate could hold more value, since the sale of Activision shares could be used to reduce its debt.

3. Negative news related to the spill in the Gulf of Mexico is hurting BP ( BP ). BP is hovering close to the low 40’s, closing recently at $41.32. Investors might want to consider buying BP for its rich dividend, which yields 5.23%. 

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