Eat Undervalued Stocks For Breakfast

The investing greats say to buy stocks as you would your groceries: look for the bargains!

Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy when others are fearful.

Those are the words of Warren E. Buffett taken from the 2004 Chairmen’s letter to the shareholders of Berkshire Hathaway (BRK-A), a publicly traded financial conglomerate.

Back in early 2001, Berkshire Hathaway’s stock price hit a two year low on the exact day the tech heavy NASDAQ hit its all-time high. And then, when the internet stock prices came crashing down Berkshire did the contrary. Now in the midst of the worst housing slump since the great depression Berkshire’s stock is hitting all time highs.

Why? Because Warren Buffet is very fearful when Wallstreet is in a buying mood. When Wallstreet is in a buying mood stocks get very expensive. As prices go up, people make easy money and think the easy money will last forever.

Very similar to when, in the housing market, people were making a living off of flipping houses. Now you can’t give away a house.

Warren Buffet waits and gets greedy when Wallstreet is depressed and thinks everything is worthless. Back in August, Berkshire Hathaway announced that it had aquired 8.7 million shares of Bank of America (BAC) in the midst of the credit crunch when others were fleeing bank stocks in droves and circulating rumors of a recession. It takes a great deal of what my baseball coaches used to call the 3 C’s, to buy when everyone else is selling.

Confidence, Courage, and Conviction

Today, Bank of America made its plans to purchase Countrywide Financial (CFC) for about $4 billion or around $7 per share public. While this wasn’t exactly the valuation Countrywide investors were looking for, B of A shareholder’s just got a great company for penny’s on the dollar.

My suggestion to anyone with the means and interest is to sift through the rubble in the financial sector. Try not to get caught up in the hype. Look in the places that others overlook. There are plenty of companies in the bargain bin for those who know what they are looking for, and in my opinion, Bank of America is definitely one of them.

Disclaimer: The statements above do not represent the opinions of YBPGuide. Greg holds a very small BAC position in his personal portfolio. Investors should be cautious about any and all investment related recommendations and should consider the source and objective before investing. Various factors, including personal or corporate ownership may influence opinion.

All investors are advised to conduct their own independent research before making a purchase decision. Past performance is never a guarantee of the future.