{"id":38726,"date":"2013-06-04T01:38:43","date_gmt":"2013-06-04T05:38:43","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=38726"},"modified":"2013-06-04T01:38:43","modified_gmt":"2013-06-04T05:38:43","slug":"the-biggest-dilemma-facing-investors-today","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2013\/06\/04\/the-biggest-dilemma-facing-investors-today\/","title":{"rendered":"The Biggest Dilemma Facing Investors Today"},"content":{"rendered":"

By WallStreetDaily.com<\/u><\/a> <\/p>\n

Four-plus years into a bull market and stocks keep hitting new record highs.<\/p>\n

The economy keeps recovering, too. Granted, it’s sluggish. But it’s a recovery, nonetheless.<\/p>\n

And, of course, the Fed keeps promising to backstop the whole shebang with easy money and absurdly low interest rates.<\/p>\n

So what’s not to like about the current market backdrop?<\/p>\n

Well, finding bargains to profit from the continued boom keeps getting harder and harder.<\/p>\n

In fact, the valuation boogeyman is lurking around every corner.<\/p>\n

Beware of the P\/E Creep<\/strong><\/p>\n

We know that stock prices ultimately follow earnings. But prices have gotten a little ahead of themselves.<\/p>\n

Case in point: In the first quarter, S&P 500 companies reported earnings growth of 3.3%. Yet, on average, stock prices are already up 11.5% this year.<\/p>\n

As Garth Friesen, Co-Chief Investment Officer at III Associates, says, “The whole move we’ve had in the S&P this year has been due to multiple expansion.”<\/p>\n

Now, Mr. Friesen might be stretching the truth a tad. But not much. Take a look:<\/p>\n

\"\"<\/p>\n

Since the beginning of the year, the trailing 12-month price-to-earnings (P\/E) ratio for the S&P 500 Index has crept 12.6% higher, from 14.13 to 15.92 (as of Friday’s close).<\/p>\n

As you can tell, the “multiple expansion” accelerated in recent weeks, too.<\/p>\n

So with screaming bargains getting harder and harder to come by, what are investors doing? The absolute worst thing possible.<\/p>\n

They’re going dumpster diving in hopes of finding an undervalued gem.<\/p>\n

Don’t Join “The Dash for Trash”<\/strong><\/p>\n

A recent analysis by Bespoke Investment Group reveals that the 50 stocks in the S&P 500 with the highest short interest outperformed the 50 stocks with the lowest short interest. (So far this quarter, the former is up 12%, versus a decline of 5% for the latter.)<\/p>\n

So investors are betting on the most shorted stocks, simply because their valuations might be beaten down relative to the broader market.<\/p>\n

It’s a recipe for disaster. And Bespoke rightly labels the trend “the dash for trash.”<\/p>\n

Whatever you do, don’t join it!<\/p>\n

Instead, be patient and more selective. Take the time to unearth companies that trade in line with the market valuation, and benefit from accelerating sales and earnings growth rates.<\/p>\n

Even if the current trend of a multiple expansion for the S&P 500 Index slows down or flat-lines, these companies will demand a much higher stock price in short order.<\/p>\n

I’m about to reveal one such company to WSD Insider<\/em> subscribers.<\/p>\n

As we speak, I’m finishing up my research report on an under-the-radar and undervalued small-cap opportunity – one that could easily double in price by the end of the year.<\/p>\n

It sells one of the hottest lines of specialty merchandise in the Southeast. And it won’t be long before the rest of the country catches on.<\/p>\n

I plan to release the report next week. All you have to do to be included on the list is sign up here<\/strong><\/a>.<\/p>\n

Bottom line: Finding bargains in the current market might require a little more work than in years past. But nobody ever said that stock picking is so easy a caveman could do it!<\/p>\n

In all seriousness, as valuations start to get stretched and the average investor starts rotating into the stock market, now is the worst time to throw caution out the window.<\/p>\n

Instead, we need to be more and more selective if we hope to boost our profits in the months ahead.<\/p>\n

Ahead of the tape,<\/p>\n

Louis Basenese<\/p>\n

Article By WallStreetDaily.com<\/u><\/a><\/p>\n

Original Article: The Biggest Dilemma Facing Investors Today<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

By WallStreetDaily.com Four-plus years into a bull market and stocks keep hitting new record highs. The economy keeps recovering, too. Granted, it’s sluggish. But it’s a recovery, nonetheless. And, of course, the Fed keeps promising to backstop the whole shebang with easy money and absurdly low interest rates. So what’s not to like about the … <\/p>\n

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