No Knives to Catch

After a long weekend of graduations, backyard feasts and amusement parks, I returned to the market this morning to find it heading higher as China's lending activity picked up, Ireland cooperated with the European Union, and Greece did not disappear. This is a very headline-driven market, and gains can slip away as quickly as they materialize. Most of the conversations I am hearing are still decidedly negative, or involve speculation on where to buy into the recent decline. Talking to investors in the past month makes me wonder what alternative world I live in. You would think we had seen some massive selloff in the equity markets, but that is not the case. The markets are down a little more than 5% in the past month and that is not unusual for the stock market.

I have been routinely running screens the past couple of weeks to see if the market is undergoing a significant inventory-creating event. The truth is, so far, it isn't even close to a real bargain-hunting opportunity. This morning I ran a screen looking for stocks that fit into the definition of falling knives, as developed by Charles Brandes in his study of buying stocks after steep selloffs. Buying stocks -- especially large-cap stocks that have fallen 60% or more in the past 52 weeks -- has been a wildly successful investment strategy....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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