It’s that time of year again. With tax time rolling around again, I get clarity on how much I can invest in my SEP-IRA for the previous year. (There’s always a difficult calculation depending on my income from the previous year.)
Some years, I have a very good idea of where I want to invest the money. I typically look for an industry that’s fallen on some times, but one that isn’t going away. For example, 7 years ago or so, energy stocks were beaten down. I didn’t believe that energy was going to go away any time soon, so I invested in it. Call me a bargain hunter everywhere, even in the stock market.
In contrast, I get very nervous with equities that seem to reach new highs every day. I feel that can be a recipe for a bubble. (Side Note: That’s not to say that some things don’t deserve such evaluations. Apple is an example of a company that seems to hit new highs everyday, but they back it up with billions and billions of sales. I don’t want to invest in one company like that anyway.)
I would say that I generally believe in a regression to the mean. With major indexes, the high-flyers come back to earth and the low-fliers catch up in valuation.
This year when I look for things that are beaten down, I’m not seeing much. The Dow continues to march higher and higher to the point where I’ve actually pulled out about 8% of my Vangaurd Total Market Index (NYSE:VTI) money to leave as cash to either invest elsewhere or buy back in at a lower level. (And if you call me out for timing the market, you’d be exactly right.) I’m nervous about the high indexes in US stocks with the national debt as high as it is. I’m not sure that interest rates can stay low forever either.
So I ask you, the reader, what sector has been beaten down? I’ll put one out there to chew on. Banks – the most beaten down of investments in 2008. I’m looking at a financial sector (NYSE:XLF) and seeing that it is far off of its highs of 38 in 2007 – currently trading around $15. However, that’s in line with banking profits since then when the big sub-prime mess. Even with XLF, it seems like it is up nearly 25% in the last 3 months. I’m not sure if that qualifies as beaten down anymore.
Leave your suggestion in the comments. The one that I like the best, even if I end up not using it, is going to be emailed $25 via Paypal or a $25 Amazon gift card. (I’d take the cash, but not everyone has a Paypal account). I’ll put a deadline of Thursday, March 22nd at 11:59PM PT for entries and announce a winner on Friday.