With Summer Coming to an End, It's Time to Buy

Oil Soaring Toward $50

In a turnaround that most analysts weren't expecting, oil is shooting back up toward $50 per gallon. The change is large enough that oil is actually up 4% on the month, rather than down over 10% as it was before this latest rally. The price of oil seems to be moving from internal market forces rather than external supply and demand, since demand is largely unchanged and supply is still at record levels.

The reasons for the rally are still unclear as of yet, but it's undeniable that oil is rising. Analysts like myself predicted continued declines -- I even said that oil could be at $25 by the winter -- but this latest bounce is making me wonder.
It would be one thing if oil was turning around because of solid, internal forces but the fact may be that the market just considers oil to be undervalued at $35 per gallon independent of real market forces. If that's the case, and it looks like it might be, then there's no telling where this rally could stop.

Buy! Buy! Buy!

After the latest big downturn as markets struggle to come back up to their pre-summer levels, the time is getting to be right to start buying. Buy low and sell high is the oldest advice on The Street, but it's solid. Right now, with markets struggling, is the time to start looking for deals even if you wait to pull the trigger on what you find.

A good example of what I’m talking about is The Fresh Market (TFM), a Whole Foods (WFM) clone based out of North Carolina. The company had a lackluster earnings report that was followed by a huge selloff, mostly due to the instability in the marketplace. Although the earnings report could have been better, it certainly wasn't bad enough for the 25% decline that immediately followed.

So why did this relatively sturdy stock tank so badly? The rest of the market was going nuts, selling off everything with any value in the midst of the Chinese currency devaluation. A stock that rises and falls on its own merits is one thing, but when share prices drop just because everyone else is selling in the marketplace there are opportunities for real profits to be made.

In our example, The Fresh Market (TFM) has recovered 10% of its value over the past 5 days and is approaching the point where it was before the selloff. Whether or not investors hold onto it above the selloff point is one thing, but if you're just looking for a quick 20% return stocks like this are worth looking hard at.
Published on Aug 31, 2015
By Aaron Phillips
Aaron Phillips is a financial researcher and journalist based out of Michigan. He regularly writes the IG Daily and IG Weekly columns.

Copyrighted 2020. Content published with author's permission.

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