Rational Investing: Investing, Asian cuisine share similarities

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If August were a dish prepared at a Mandarin restaurant it would be a difficult menu item to describe. I would call it Sweet and Sour and Hot.|ret||ret||tab|

The Sweet is that some of the nicest people I have known were born in August. The fairways are usually baked hard enough to provide an extra 30 or so yards of roll. And there are only 30 days or so left of dodging skateboards and dirt bikes during the week.|ret||ret||tab|

The Sour is the summer market doldrums; the downward biased ennui that pervades the markets as Wall Street exercises its August vacation preference. Most years that means lower transaction volume, which in turn generally means markets that drift lower.|ret||ret||tab|

And don't forget the Federal Reserve Open Market Committee meeting on the Aug. 22. It will be another opportunity for Chairman Quixote Greenspan to wield his lance against the windmills of inflation. The mere thought of that will have stock and bond market participants reading every tea leaf for evidence of whether the Fed will raise rates or leave them where they are.|ret||ret||tab|

What effect will this year's campaigns have? Those irritating, ubiquitous, mostly negative (if the past is any indication) political commercials on TV and radio will increase their frequency. Of course, the TV investment talking heads will interpret each poll taken and the impact that the then-leading candidate will have on this or that industry. |ret||ret||tab|

Aha, that's just what I want to happen," you say. "This is all noise static for me. I am going to see what kind of bargains all this confusion causes. It could be the best buying opportunity of the year."|ret||ret||tab|

You are right. It could be a period similar to, although probably shorter than, the 1992 decline in the pharmaceutical stocks caused by investors' fears that Hillary Clinton and her stealth health care task force would do irreparable harm to the health care industry. Great bargains were lying around for the plucking.|ret||ret||tab|

The Hot? No, not hot stocks hot (or at least warm) opportunities. If you are truly a serious investor who looks for returns over a period greater than a couple of days, opportunities to acquire some great companies at reasonable prices are likely to present themselves. Use the screens we have written about the past two years, especially PEG, price/sales, sales and revenue and earnings growth rates and institutional holdings. Look closely at the results those screens produce dig into the companies. Have your broker give you his most objective research reports, check out the issues using Value Line or Standard & Poor's or Argus other references at your library. Then assign prices at which you would purchase the issues on the resultant list. |ret||ret||tab|

Now, here's the tough part. If the market gyrates and hops around and those prices are hit buy the stocks you have selected. Don't worry about the next day or the next quarter. If you have done your homework well, if you are truly an investor rather than a speculator, then act.Be patient. Warren Buffet didn't get rich over night.|ret||ret||tab|

(Clark Davis is a 30-year investment veteran and CEO of Saint Louis Investment Advisors. Send comments by e-mail via the Business Journal at sbj@sbj.net.)[[In-content Ad]]