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Investment Strategy

Buying the Hiccups

By Elliott H. Gue, on Nov. 22, 2017

With the long-running bull market showing no signs of tiring and the S&P 500 shrugging off geopolitical tensions and policy uncertainty, momentum rules the day and value-seeking investors must dig deep to uncover legitimate opportunities.

In this environment, some might be inclined to close their eyes, plug their noses, and wander out on a limb to find a bargain. Unfortunately, many stocks are cheap for a reason; valuation alone doesn’t make an investment thesis.

But value investors shouldn’t abandon all hope in the latter stages of a bull market. Elevated valuations raise the bar of expectations, increasing the risk of disappointment—and traders sitting on big profits in a stock are more likely to sell first and ask questions later.

The market’s overreaction to earnings-related hiccups can create buying opportunities for nimble investors who have the conviction, and the attention span, to look beyond the most recent quarter.

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