Dian's Column
Dian's Archive


Tracking down the best bargains

- Alan Lavine and Gail Liberman

The best way to invest is to buy when the markets decline and the news seems at its worst. Those are the words of John Templeton, renowned investor and founder of the Templeton Funds, now Franklin Templeton Funds.

The mutual fund guru was interviewed by his niece, Lauren C. Templeton, in the book, "Investing the Templeton Way (McGraw-Hill)."

"Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria," Templeton says.

So how does he recommend that you invest?

  • Invest when the news is really bad.

  • Don't use technical analysis to spot trends because it doesn't work.

  • Invest in bargain-priced stocks that are undervalued. The best stocks are the ones consider neglected and out of favor by Wall Street.

  • Invest worldwide in companies that have a great long-term outlook.

  • Invest in companies with sound business models when they are cheap.

    Now for the million-dollar question: How to find these types of companies?

    Analyze the company's business and the quality of its management. The stock should be beaten down so much that it does not reflect future earnings. The company should have a strong balance sheet, which means a lot of productive assets when compared with liabilities. The stock is a good deal if its price is selling below the price per share of what the company would be worth if it were sold.

    Where can you get this information?

    You financial advisor should provide you with analyst reports that highlight important financial information on a company. You also can get tons of financial information on the finance section of Yahoo!.

    Unfortunately, these criteria can be a lot to handle for the average investor. So the easiest way to find bargains both in the United States and overseas is to get the help of an experienced financial advisor. Or, invest in well-managed mutual funds.

    Some top-rated mutual funds that invest in undervalued large company U.S. stocks include Bridgeway Large-Cap Value and Vanguard Capital Value, according to Morningstar Inc., Chicago.

    On the emerging market side, the top-rated fund is the Oppenheimer Developing Markets Fund.

    Best rated undervalued large company foreign stock funds, Morningstar says, include: Dodge & Cox International Stock and Harbor International.

    Please don't put all your eggs in one basket. People who invest in individual stocks should own about 18 different companies in different industries. That way, if one stock does lousy, it should not hurt your overall portfolio. In addition to stocks, it's a good idea to invest in bonds, cash, precious metals mutual funds and real estate stock funds for diversification.


    Spouses Gail Liberman and Alan Lavine are syndicated columnists. You can purchase Alan Lavine & Gail Liberman's latest book Quick Steps to Financial Stability (QUE Publishing 2006) online at www.moneycouple.com or at your local bookstore. E-mail them at MWliblav@aol.com.

    To read more columns, please visit the column archive.

  • [ top ]