Quality Companies at Bargain Prices

Last week I bought 2 stocks hoping to make a quick profit in the months to come. Short term volatility is not a concern for me. After all, the last stock I chose in November, Cineplex, dropped in price right after I bought it. But today, I am up more than 6% on that investment. Not too shabby, considering that the average stock market is down 6% in Canada (TSX) and down 4% in the US (S&P500;) during the same period.

Silver Wheaton (SLW.TO)
This silver company based right here in Vancouver buys silver from other miners at really cheap prices and then sells them on the market for huge profits. Their operating margin is 74%. They are trading at only 12-13 times future earnings. Very low compared to its historical valuations which has normally been around 20-30 times. There is nothing wrong with the company. It’s still growing. An absolute bargain right now.

Halliburton (HAL.NYSE)
Remember this company? I used them for my previous swing trade to make 8% in just over a month. Very well run company. They provide drilling services to other oil companies. Trading at 7-8 times forward earnings. That’s also really low since it normally trades at around 10-20 times. Very cheap right now compared to its intrinsic value.

My strategy this time:.
-If either stock moves up by 10-15% from what I paid, I will consider selling that name alone, or both.
-If either stock moves down by 10-15%, I will buy more stocks of that company.

That’s it. Very simple plan. This strategy will only work however, if you are confident that the company(s) you choose are leaders in their fields, large enough to withstand any kind of recession, and very likely to be more profitable 10 years from now. Both companies fit those criteria for me. And because they are commodity based stocks, I am also protected from inflation. If oil or metal materials become more expensive, then these stocks will likely increase as well.

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Shervins World
12/20/2011 10:44 am

Very interesting blog!!

I'm following you!!

Be sure to check us out at http://www.shervinsworld.com



Liquid Independence
12/21/2011 10:40 pm

Thanks. Your fashion site is pretty interesting too. Looks like it *suits* your passion.