See ‘Tremendous Value’ in Stock Dive

See ‘Tremendous Value’ in Stock Dive

$DIA, $SPY, $QQQ, $RUTX

  • Savvy investors are not worried about Southside risk in here.

Investment guru Leon Cooperman said he is finding “tremendous value” in many stocks right now amid the market plunge.

The Omega Advisors founder said he does not really see any signs of a lasting Bear market and urged savvy investors to buy “their favorite stocks” while prices are falling.

“Do not favor the notion that we are headed into a Bear market. Own your favorite stocks, hold cash, limit your holding of bonds and keep the maturity shorter than average,” he said.

“A Bear market is not just a price decline in a short period of time. There is plenty to worry about, but I am finding a tremendous amount of value in the market,” Mr. Cooperman said.

A Bear market is commonly defined as a drop of 20% or more from recent highs. It is not there now.

“To me, I’m going to have a combination of cash and stocks…even take a long-duration asset like Google, which has over $100 billion cash in the balance sheet…20 times earnings. I think that’s better than cash in my way of thinking,” he added.

Volatility has more than 2X’d this year from near historic lows in major exchange-traded funds tracking US equity indexes and sectors, bringing it closer to long-term averages. The CBOE Volatility Index (VIX) peaked at February marks (30.25) before pulling back to 28.38. 

Overall, single-stock options prices imply a continuation of those levels in Y 2019, which are not extreme by any means.

Low volatility aka market calm, that characterized the stock market for 5 years was broken as everything from NKorean nuclear threats to the US-China trade dispute, and concerns that corporate earnings growth dampened investor’s sentiment.

Looking to Y 2019, we see an unusually low premium for Put options on the SPDR Dow Jones Industrial Average ETF Trust, VanEck Vectors Gold Miners ETF and Consumer Discretionary Select Sector SPDR Fund signaling that investors are less worried about Southside risks.

Stay tuned…

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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