Lessons From 2008: Invest in Pessimism

In my first installment of valuable lessons to be taken from the 2008 market collapse, lesson number one was about the importance of cash management, without which you expose your portfolio to the maximum degree of risk, regardless what investments you hold. Lesson number two is learning to invest during times of maximum pessimism.

By avoiding leverage and keeping plenty of cash on hand, you stand ready to take significant advantage of opportunities that only a pessimistic market environment can provide. Teck Resources (TCK) is a diversified commodity producer that fell below $5 a share during the depth of the market selloff. I examined it in more detail on Real Money when the shares were around $15, still an attractive price given the company's assets and earnings power. Two years later, shares were trading above $60. Interestingly enough, Teck shares have fallen back to $29 today and trade for 7x earnings, along with a decent yield of 2.6%. Perhaps the opportunity to take another swing is forthcoming. ...378 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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