See allLatest Trade Alerts

On the Ascent

Written by: Doug Kass 04/25/12 - 12:00 PM EDT
Tickers in this article: AAPL

Unlike some, I welcome lower prices; they provide attractive entry points. Wearing my hat as an investor, I never quite understood the notion of selling because the market is breaking down, when share prices grow cheaper and when putting in buy tickets is the hardest trade. The Oracle of Omaha expressed the concept of buying low (and on weakness) more eloquently: "Price is what you pay; value is what you get." (Of course, one that wears the hat of a trader must be more responsive to the market's price action.)

Many subscribers justifiably have asked how I can become so much more constructive if the averages only fell to slightly lower levels than fair market value. Below are a few brief answers:

  • As I have repeatedly written, in a fairly valued market, many individual stocks can thrive.

More Headlines

  • My fair market value calculation is not intended to be pinpoint and precise; it is a guideline.

  • Deteriorating sentiment and an oversold market often places many market participants offside (underinvested or short), serving to exacerbate rallies.

    • So, what has happened to stabilize the markets since Friday's close? Below are four impactful factors:

    1. Overall earnings and forward guidance were far better than many of the pessimists expected.

  • Apple remains a pivotal stock and an important contributor to aggregate corporate profits, and its blowout results cannot be overstated in consequence and on investor sentiment.

  • The general concerns regarding domestic economic weakness might have been overstated -- my baseline expectation of a muddle-through 2% real GDP trajectory still seems likely.

  • Lower market prices began to discount the known economic and market headwinds and threats.

    • From my perch, the U.S. stock market might now be heading back to new highs.