Micro Blog #9: Taking Advantage Of This Market Pullback

Given the recent pullback in the market, a rather quick and steep pullback, many utilities have come down below fair value.

I took advantage of this pullback and added to all my utility positions. Below are the utilities I currently own and have added to during this pullback. I'm listing them here along with the fair values that I have determined using FastGraphs valuation method.

As of 2/7/2018

As for the overall market, it has been trying to recover from this sharp decline for the past two days. Yesterday, was a big up day, signalling a strong recovery (see the large green bar in the chart below, indicating big buy volume).

This morning, it did look like it was going to be another good start as the buy volume ticked up (the small green bar).


But by midday, market started to get choppy and by end of the day, it reversed and ended up closing slightly negative. The buys were over-taken by sell orders (the small red bar). However, the sell volume wasn't nearly as big as we saw on Friday or Monday. So, it's a good sign that market is trying to recover.


Per experts, there are no fundamental issues with the market or the earnings, and the correction is mainly caused by fear of interest rates hike coupled with some technical issues (computer driven cascading of stop orders that caused Monday's flash selloff).

Even though, today's decline wasn't nearly as bad as Friday's or Monday's crash, it may still take a couple of more days for the market to get stabilized and fully recover. It is expected that once fully recovered, the market will continue its upward momentum.

My take on all this, we have been waiting for such a long time for a nice correction, and it's finally here. Might as well take advantage of this pullback, as who knows when we get to see the next one.

Comments

  1. Almost feel algorithmic trading is responsible for the fluctuations. Nice opportunity to buy cheap stocks. I got some XOM and QCOM. Broadcom raised price to 82$ per share :-)

    ReplyDelete
    Replies
    1. Yeah, that’s what l heard happened on Monday. Once a huge stop order executed it just started a chain reaction of stop order executions one after another with each sending price lower and lower.

      I own QCOM as well. Hope the deal goes through. That’s about 30% premium.

      XOM is a great buy and one of the biggest benefactors of tax reform. Very nice yield as well.

      Delete
  2. Agree Mr. ATM. On an overall market basis, the pullback reset us to merely December levels. But what we are also seeing is some sectors falling out of favor coupled with the overall market slide. Those 2 things combined have led you, and rightly so, to the utility sector. I have been on the sidelines, but may add in this are too. Tom

    ReplyDelete
    Replies
    1. Tom, for me, it's all about cash flow generation. So, even if utilities and REITs continue to keep going down, I would keep adding them as cash becomes available.

      Therefore, since buying is not a one off thing, I don't see the point in waiting for better prices. Even if stocks get cheaper later, I'm not missing anything, as I would get them again. I just keep recycling/rebuilding my buy list. That how I roll ;)

      Delete

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