Two Examples of Playing 'Bad News'

Yesterday, I dished on using "bad news" as an opportunity to scale into positions if the underlying thesis is intact. Of course, if the investment thesis no longer holds or if something has dramatically changed, then you're better cutting your losses and re-investing your proceeds into stocks with better growth prospects that are trading with better risk-to-reward characteristics. Amid the flood of earnings reports, there have been a number of confirming data points among the "bad news," and even truly bad-news cases that we've received.  

As regular Real Money Pro readers know, one vertical that has been painful for many investors has been the sector of homebuilders and related building-product companies. Despite the recent weak March reading on new-home sales, I've continued to be bullish on the homebuilders, largely because of the need to bring more affordable housing to market at a time when housing inventories remain rather low. And despite the weaker-than-expected headline for March housing starts, single-family housing starts for the month rose 6% compared with February, which was higher than January....512 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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