Keep The Faith

  • March 12, 2001
  • Gary Kaltbaum

“If
investor expectations become more realistic — and they almost certainly will – 
the market adjustment is apt to be severe, particularly in sectors in which
speculation has been concentrated.”  — Warren Buffett 
in last year’s Berkshire Hathaway annual report.
      

I write this because I remember about the
beginning of last year, many people were saying that Buffett had lost his touch
and that he was nuts not to buy into the Internet and other tech areas. Methinks
people will start listening to the voice of reason again. I also write this
because I still remember losing an account that had tripled in two years. This
person complained that I didn’t do well enough and that I should have bought
more Internets. That phone call will be something I never forget in this
lifetime. That call, as well as the past year, will always remind me that it is
so important to understand the meaning of a certain four-letter word — risk!

I usually spend at least 90 minutes on Sundays going through the Nasdaq Daily Graphs.
It took me about 10 minutes this weekend. Lots of crossing out with my yellow
highlighter. It is humbling as to what kind of damage has been done … with no
let-up in sight. I urge all my readers and listeners of my radio show to never
forget this past year. I will not depress you  anymore with Nasdaq talk in
this report. The rest of the report will be about what is working.

I am a growth stock guy but one has to come to the realization that it may be
months or even longer until there are proper setups in those areas. One must
look elsewhere. Time to put on my technician hat. I have been telling you about
cyclical and value areas that have come to the forefront. I still believe that
they won’t last too long. History bears that out. But… they are working right
now.  I may choke on these sectors, but what the heck!

Aerospace/Defense, Auto Parts, Autos, Chemicals, Metals… am I exciting you
yet? Oils, Pollution Control, REITS.

All these areas contain stocks that have decent setups. You can find some of
them on the NEW HIGH LIST. Whether they shoot out of here is another story. They
are certainly not the stocks and sectors that lead markets out of the doldrums.
But until the market decides to stop all its nasty action, I will just try to
isolate for you what is working. Keep the faith.