Joseph Shaefer wrote the following:
My own discipline is to conduct deep research, buying unloved and undervalued stocks in out-of-favor sectors in which I see a catalyst for change in investor perception and/or in the sector or company’s ability to use that change to increase their revenues, market share and margins. I buy the best quality firms anywhere I find them, the less “popular” the area the better (yielding better entry prices,) then hold unless market conditions change or I find a more compelling investment -- if we are in a secular Bull market!
But during secular Bears, no matter how exceptional the company, I know their stock can be battered by a general market malaise as well as by a single news item or event beyond their control. In big "B" Bear markets, people are fickle and will panic at the slightest provocation. So we use the same scrupulous research methodology but we also conduct a daily review of all client accounts and a regular reallocation of assets. Different times call for different measures.
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Ideas we can use and argue:
* If you have a screen that includes sector (like choosing the top 3 sectors), you should adjust them for bull market. Buy stocks in out-of-favor sectors in bear market and vice versa. Different from Joeseph's?
* As a confirmation, you can get a better price when certain adverse event happens.
* Buying on value takes a longer time for appreciation as you're against the tide, and vice versa for momentum buys.
More on secular market.
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Look first at whether the market is above the 220 dma to determine if bullish or bearish. Only if bullish, buy the top two sectors. CXO advisors has a nice paper of a backtest of this strategy. It is now behind the paywall or I would post a link.
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