Markets are bubbling, and investors are feeling like geniuses.
And that’s why I’m becoming more cautious.
Across my paid services, we’ve started to cut positions, trying to limit our exposure to high-quality names.
This is a market in which investors pat themselves on the back, cheer their success, and look for more by doubling down on their exposure.
But unless you’re a short-term trader looking to chase momentum, this is the time to do the opposite.
I don’t mean totally exiting the market and sitting on cash. Rather, try to see where you can cut back exposure.
Think like a real estate investor, use these bubbly conditions to sell bad stock.
Now’s the time to sell the house with bad neighbours
You may not have fully understood the business initially, but you have started to understand its weaknesses over time.
This is the market to sell those stocks—the laggards in your portfolio.
I’ve experienced this plenty of times. It’s why you have to continually trim off the rough edges of your portfolio to make it a great performer.
It takes time to build a list of quality names.
We all make mistakes, so you must treat this market like a gift—an opportunity to offload weakness.
Something else you should do right now…
Try to think about what could cause the next market shake-up
In my mind, higher energy prices loom as the #1 risk.
Who knows the reason? Perhaps it’ll be geopolitical, such as second-level sanctions over Russian oil.
Or the Middle East no longer playing nice, cutting back its oil output.
Either way, weak energy prices today remain the last line of defence against runaway inflation.
If that final nut cracks, it could unleash major inflationary fears in the market, denting investor optimism and weakening consumer confidence.
However, there is a way to turn that risk into an opportunity.
Investors who focus on resource stocks will have an edge over inflation.
That’s because real assets, including mining equities, have a proven track record of outperforming during inflationary periods.
But you can go a step further…
You see, fuel is the major expense item for miners; higher prices cut profit margins.
It’s why ENERGY STOCKS are perhaps the best bet against persistent inflation.
And if you start to dig into this sector, you’ll discover it’s swarming with opportunities.
It’s something I’m doing with my premium members here, looking at several high-quality names in Australia and overseas.
Stocks swimming in cash, and sometimes offering substantial double-digit dividends, another safety net for investors!
You can find out more here.
Regards,
James Cooper,
Mining: Phase One and Diggers and Drillers
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