Is FUD threatening your portfolio?

Posted Aug 21st 2007 6:30PM by Georges Yared
Filed under: Consumer Experience, Apple Inc (AAPL), Define Investing, Crocs Inc (CROX), Bargain Stocks

In the past couple of weeks, investors, traders and company managements have probably used a little different "F" word with the market volatility. The word I have used for over 20 years when we have encountered these types of markets is FUD.

FUD stands for fear--uncertainty and doubt. FUD makes the world--okay maybe not the world, but the markets go round. Typically, in stable markets investors like the status quo: earnings come in as expected, stock nudges up and everyone sleeps well. Life is good, markets are good. Just when you least expect it--here comes FUD!!

The fear is will we ever see profits again? Will my stocks make their earnings expectations or will guidance go way down crushing their valuations? Will the Federal Reserve wake up and absolve us of all past sins?

Uncertainty is can this market really go up again? Can companies make numbers and be optimistic? Should I be in US Treasury securities because they are guaranteed by the full faith and credit of the US Government? Will other major world markets follow our lead and continue melting as well?

Doubt is I will never be caught again in a high price-earnings stock. Doubt is I will never listen to another talking head on TV or radio. Doubt is I will buy gold coins and stuff them under my mattress because gold is still the world's precious metal...right?

Historically, FUD is when level headed investors make good moves. The type of moves where 6 to 12 months later the FUD sufferers exclaim "why didn't I think of that?" Or "man, that stock was oversold and cheap as hell. Where was I?".

Remember waaaay back to February/March of this year when we saw a market meltdown because of the "China" scare? Great names got taken down because bad markets take down the good names with the bad names. Opportunity knocked and those that had sworn off FUD, having been through FUD treatment, bought some great names at cheap prices.For example, Apple (NASDAQ: AAPL) fell from the high $90's to the low $80s and Crocs (NASDAQ: CROX) fell from the high $20's to the low $20's.

This market is different!! Yeah, I know I have heard this a lot, but businesses are built to grow and at the end of the day that's exactly what happens. Markets weather tough storms, take on water, but eventually sort themselves out. Quality companies are still quality companies and quality attracts capital. It's always been that way and always will...

So check yourself and ask if you are suffering from FUD? TV news shows love FUD sufferers and even contribute to it...

Georges Yared is the CIO of Yared Investment Research and the author of Stop Losing Money Today.

Tags: AAPL, Apple, Crox