Plenty of investors are making their decisions these days in reaction to Russia’s invasion of Ukraine and that's a big mistake.
“In the long-term, stocks will trade for what they're really worth,” Real Money Columnist Paul Price wrote recently. “Months from today, Ukraine will be off your trading radar, but the great values, created by focusing on it presently, won't still be available.”
While world events can move the market in huge ways, the resulting ripples in individual stocks may not have anything to do with the events in question.
It’s an issue that Price has written about frequently, notably in the early days of Covid.
During the first part of 2020, the stock market took some of its largest losses in years. Investors rushed to sell off their assets across the board… but why? While mom and pop businesses went out of business in droves, there was little reason to think that large, publicly traded companies wouldn’t bounce back. In fact there was every reason to think that the federal government would ensure that they were just fine.
And, indeed, that’s just what happened. By October, 2020 the market had regained its value and then some. Within 12 months of the original selloff, the investors who bought during that mass liquidation were sitting pretty on huge gains.
That’s not necessarily a call to buy everything in sight. Instead, Price makes the same suggestion he always does: Buy good stocks, and especially do so if someone else is willing to sell them for less than they’re worth. It’s just… during a time of crisis, a lot of people are willing to sell good stocks for less than they’re worth.
Price recently cited FedEx (FDX) as a current example.
FedEx "has been a proven growth stock over the past decade despite many huge market disruptions," Price wrote. "From Fiscal 2011 through fiscal 2021 EPS soared by more than 270%. Dividends grew by over 440%"
During that time, "continuous holders saw almost 148% total returns, but that number is far short of the actual value created.”
In fact, "Throw out the momentary Covid-panic low and FDX was only available one time since 2011 at a P/E lower than its current one. Buyers in February of 2016 were well rewarded. FDX was about to surge from south of $120 to north of $274 in under two years," Price wrote.
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