Broad Patterns for the Value Investor

Even for a value investor, sometimes it pays to look at the forest instead of the trees. Recognizing a shift in the wind or a subtle shift in sentiment is just as important as understanding an individual business. After all, it really didn't matter what security you owned at the beginning of 2008 -- when markets drop 40%, that's a headwind that no one can fully escape. 

I have observed a few patterns over the past few months that could prove to be far more than subtle. I wouldn't ascribe much weight to them individually, but when I connect the dots, I find that maybe it's time to pay attention. For example, every weekly issue of Barron's publishes a snapshot of 13D or related filings. These filings indicate investment activity of a company's major shareholders (those who have a 5% position or greater). Barron's reveals three categories: new 13Ds (when an investor takes a 5% stake), increases in positions and decreases in positions. For the past couple of months, the level of new 13D filings has tapered off. Furthermore, fewer and fewer investors are increasing positions, while more and more investors are decreasing positions....379 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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