If you're sick and tired of trying to predict the ups and downs of a market that has been bouncing in a tight trading range for 2 months now, author, blogger and value investor Vitaliy Katsenelson has some bleak news for you. "We are in a sideways market that started about 10-years ago and I think we still have another 5 to 10 years of sideways markets ahead of us," he says.
Before you throw in the towel, Katsenelson, who is also the chief investment officer at Investment Management Associates in Denver, says sideways does not mean trendless. Quite the contrary. In the past 10 years, he says there have been four distinct and investable bull and bear cycles.
"During the cyclical bear phases is when you want to buy stocks," he says in the attached video. "In the last month-and-a-half we've had some incredible opportunities in U.S. stocks." His top pick right now is well-known, and so are its problems.
"Hewlett Packard (HPQ), the most hated stock in America, which I love, is almost like BP (BP) a year-and-a-half ago." He says the bad news ("it has a dysfunctional board") is already reflected in the stock, which has been cut in half in the past 8 months, but just snapped back by 12% in the past week. What he likes is a company that dominates every business they compete in, new billionaire CEO Meg Whitman who is in it for her reputation rather than the money, and a PE ratio under 5. "This is not a broken business," Katsenelson says. "I understand why everyone hates HP but this is when you want to buy it."
Xerox (XRX) has similar appeal to him, calling the stock "insanely cheap" and notes that it is only being bolstered by an aggressive share buyback program.
And just when you thought it couldn't get riskier, our Russian Friend of Breakout comes out with this: "I think there is definitely value in Europe." He points to Vivendi as an example that he owns. As much as there is currency risk with any European stock right now, he thinks the French media giant trades 40% below its breakup value, has a single-digit PE ratio, and pays a 10% dividend.
What do you think? Is it time to hold your nose and bottom fish or head for the hills?