Calling All Buyers

This is a heck of a way to start a new year. Last week was the third straight down week for 2005 — out of three weeks total. All three of my Dow portfolios are in the red, with Dow 1 leading at -9%.

What to do now? This is a case where procrastination paid off. If you’ve been sitting on this year’s investment money, now might be a good time to get it in the market. This downward slide can’t last forever, as we’ve discovered so many times in the past. Particularly if you’re investing in large, quality companies, a dropping market in the middle of strong earnings results is a pretty good buy signal. From Briefing.com’s Jan. 21st market wrap:

…even though roughly 80% of the more than 100 S&P; 500 components reporting earnings so far have either met or exceeded analysts’ forecasts, the lack of follow through from buyers has remained a reality…

My Dow 1 portfolio is now 9% below where it started the year. Double The Dow is down 7%. Good moments for dollar-cost averaging, I’d say.

Here’s some more good news, no matter how you eyeball it. I wrote two weeks ago that buying UTStarcom anywhere below $16 would probably prove profitable in the near future. It quickly got back above $16, thereby rewarding the bravery of whomever followed my advice. Now, even after the market’s new year slide, UTStarcom is still at $16.21. That’s high enough from the buy threshold I specified that I can feel good about suggesting it, but low enough compared to a month ago that you can feel good about buying it (or buying more of it).

I’m hanging tight to all of my current recommendations. The market is probably ending the short-term slide, especially when you consider that it’s behaving as if companies reported bad earnings. They didn’t. Once the crowd awakens to that, we may see higher prices before summer.

Here’s what Donald Luskin had to say on SmartMoney after the market close last Friday:

The best rallies come after declines — when the pain of losing money and the fear of losing more drives the weak players out, and stocks have nowhere to go but up. . . . Sentiment is already deteriorating to the point where, when it turns, stocks could make a move back to the highs reached at the end of 2004 — and I think they’ll go even higher.

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