Two irresistible investing forces

June 25, 2012, 2:45 pm Bruce Jackson Yahoo!7

Now the Greek election crisis is over, we can safely move on to the next crisis.

And it didn’t take long for the markets to zero in on the next candidates…

  • Surging Spanish bond yields
  • A slowing Chinese economy
  • A sluggish US economy

Greece is toast

This European debt crisis is not going away. There’s no easy way out. Greece is toast with the euro, and it’s even toastier without the euro.

It’s going to take decades for a country like Greece to be competitive. Years of endemic corruption, tax avoidance, big government and welfare benefits have dragged it down. Turning the Greek boat around will not be easy.

Without trying to belittle the very real pain of the Greek people, in world economic terms, Greece is insignificant.

But the euro is not. And nor is Spain. Or Italy. Or France. All those countries are effectively bust. And none can compete with mighty Germany. German efficiency is simply not in their DNA.

God bless China

Mind you, Australia couldn’t compete with Germany either. But luckily we don’t have to whilst China keeps buying all the stuff we keep digging out of the ground. God bless China, mate.

So, what’s an investor to do?

Don the flak jacket, steel the nerves, build a cash war chest, and go to battle.

Don’t touch the garbage

There are roughly 2000 ASX companies quoted on our stock exchange. Putting it bluntly, many are highly speculative pieces of garbage... or are leveraged to -- and past -- the eyeballs.

Luckily, as an investor, you don’t have to play in the sewerage. There are plenty of good companies with decent growth prospects trading at reasonable prices.

It’s in that group of 200 or so companies that we spend our time hunting for the best of the best ASX stocks.

Europe-free zone

Many of these companies are virtually immune to the European mess.

They are growing strongly because they have strong competitive positions, are operating in industries that have structural tailwinds behind them (think technology and biotech, for example, as opposed to media and traditional retail) and have long growth runways ahead of them.

Get it right, and it’s playtime in paradise for investors who are prepared to do their homework.

And here’s the kicker...

Nervous markets mean we’re able to pick up quality stocks at good prices.

Simon Shields of Monash Investors seems to agree, saying in The Australian Financial Review...

“The markets have been very oversold. We are able to buy into markets at very attractive levels now.”

Investing is not without its risks.

There is company specific risk, like the recent profit warning that sent shares in infrastructure development company Seymour Whyte (ASX: SWL) down 33% in a single day. Ouch.

Infrastructure is a tough game, as we’ve seen with recent profit downgrades in the space. It’s cyclical, highly competitive and characterised by thin margins.

These are always businesses you want to buy cheaply. While Seymour White is definitely one for the watchlist, we wouldn’t be buying yet.

A wonderful world of investing

Risks. Opportunities. Profits. Losses. It’s all part of the wonderful world of sharemarket investing.

Stating the obvious, the goal is for the profits to outweigh the losses.

Two irresistible forces working in your favour

Luckily, as an investor, you have two strong, irresistible forces working in your favour…

1) Time is on your side.

2) Shares can go up hundreds, even thousands of percentage points. But, they can only go down 100%.

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