In a race, when the yellow caution flag is out drivers are prohibited from advancing their position, and are subject to penalty.

In the stock market no such rule applies. When the caution flag goes up it is a sign you may be nearing an opportunity to advance your position, and it would be foolish not to do so. I think the market has definitely had the caution flag up the last two weeks as we enter earnings season.

I have written several articles regarding watch-lists encouraging our readers to be prepared for buying opportunities, and as I look at my watch-list it appears that many stocks are nearing prices that would make it attractive to add to my position.

Many people are questioning why they should be in the stock market at all, now or ever. One person even asked me to show him a single stock that has had anything positive to show for itself in the last ten years.

How about something positive over the entire ten years, or at least eight. Given I have made many sour picks this year I was proud to reveal one of my best picks ever and perhaps a good place to hide if you can get in on a dip. I first mentioned it in Scary market -- any safe stocks? about fourteen months ago when the market first took a dump.

My star attraction is the Southern Company (NYSE: SO) and the following is the chart. It has been a consistent performer and paid a dividend to boot which currently stands at 4.38%. As you can see this stock would have allowed you to double your money when the Standard & Poors 500 Index is actually down.



Here is what I said back then:

• Southern Company (SO) has been the biggest addition to our family holdings. It is now in at least seven portfolios and I have sold naked puts for November 30's. I AM NOT RECOMMENDING ANYBODY SELL NAKED PUTS. Selling naked puts is very risky and as they say..."don't try this at home folks." I like Southern because it is near a 52-week low, but has had five years of continuous growth. It pays a huge dividend, as utilities traditionally do, and it is located in a part of the country that has relatively low wages, cheap land, good weather, a favorable tax environment and it has seen tremendous growth in the past two decades, which I believe is very likely to continue.

I recommended it again last month in a follow up story Serious Money: 5 more stocks better than CDs -- NUE, PDS, SO, WFC, XEL.

'SO' there is good news to report even in a crappy market. Put this on your watch list. If the next ten years turn out to be as bleak as some fear they might, the dividend alone will provide you with some much needed shade from the heat.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own shares of SO.

You all can worry about whatever you want to worry about. You can follow the bulls or bears, day traders or CD holders, Wall Street pundits or the guy next door, it does not matter to me. I am looking for opportunity in the rubble.

If you are a true investor, you have a watch list -- when there is fear and negativity in the market like there has been the past few days, there will be opportunities. It is not a time to jump in with both feet, and it is not a time to speculate. It is a time to pick and choose among the companies and stocks you know well.

I would like to own more Intuitive Surgical (NASDAQ: ISRG) but it has run up so fast it has escaped my grasp, although I sense an opportunity is in the wings. I would like to own more Anglo American PLC (NYSE: AAUK) but it jumped up after recent acquisition talks in the mining industry and has not settled down yet. And it may not, but I will be patient. My regular readers know I love Huaneng Power Intl ADS (NYSE: HNP), which hardly moved today but has come down significantly in the past week, and that is very, very tempting.

Since the China meltdown last week; and all the turbulence in world markets; and Greenspan and Bernanke comments; and this weeks recovery of half the losses ... I came back to my terminal after taking a break for a couple of days to find good news.

Since my post Chasing value: Aluminum Corporation of China ADS last week, (NYSE:ACH) has continued to recover and is now up considerably. Having a buy order in at a 20% discount to a bargain, execute, and go up after scooping me up and keep on going in a positive direction is delightful. REALITY CHECK: Yes It could dive again just as fast!

But there is a lesson here. Investors that do their own stock picking must have a watch list, be patient, and be willing to act on their predetermined evaluation no matter what dumb things happen in the market. ACH was a bargain at approximately $27 per share but I do not feel comfortable buying when a stock is at an all-time high. However, at $22 my buy order triggered and I picked up a bargain that closed today at $24.35. If I was a stock trader I would take my 11% profit in 4 days and run. As a buy-and-hold guy I'm keeping this one for the long haul. ACH has a 5.4% yield with a P/E of 8.4. If the stock goes nowhere the rest of the year. I will have a 16.4% return -- very nice, but I see the demand for aluminum in China continuing to increase for the next few decades and this stock as one of my best picks ever.

Read the story and check it out for yourself. Peace to all.

Check out my other posts for BloggingStocks here.

Sheldon Liber is the CEO of a small private investment company and the vice president for design and research at an architecture & planning firm.

My father-in-law introduced me to the idea of having a "hobby" portfolio many years ago to satisfy certain needs that are not met by his predominant focus on index investing in low cost equity mutual funds. He and I have often engaged in discussions about the stock market and equity investing over the years. He understands that a diversified index fund can be beaten by stock picking but as a rule that is not the case, especially over a long period of time, and it is certainly not the case for non professionals.

He uses his hobby portfolio to invest small amounts of capital in companies in fields that interest him and are within a reasonable driving distance of his home, less than two hours I believe. This allows him to go to the annual meetings and develop a more personal relationship with the company and perhaps a better understanding of their business, as well as being able to ask questions. In fact he reported that the last meeting he attended had only ten stockholders present and the CEO answered all questions at great length.

After reading my post 10 Reasons I think Google is going down he informed me that he bought 10 shares of Google sometime ago at a great discount to todays price. That's a good thing in my opinion because todays price is not one I can rationalize as those following my blogs already know.