Portfolio Corner: Be Prepared For Opportunity

Investors Get Ready

By Steven Mayo

With the markets doing well over the last six months, many investors wish they had done more buying. Of course, this is human nature. And this is also a sign that it may be time to prepare for a correction.

Markets having corrections is normal.

Long time investors know the following — markets have cycles (both economic and emotional), there are various sectors within the markets to consider at different times, and then there are surprises . . . unexpected events. I’ve seen many in my 36 year career.

There is always plenty to consider when investing, but being prepared for the next opportunity is what all investors have the ability to do.

Doing your research is important. Understanding each company you are considering adding to your portfolio is a good place to start.

A research report is much more than numbers, and can be quite revealing about a company, its industry, and its ability to improve earnings. Research Analysts evaluate business models, market share opportunity, future growth prospects, management and ESG (environmental, social, and governance). All of these variables often lead to conclusions on how well a company is managed and its future prospects.

Detailed research helps investors get a clear picture on long-term shareholder value creation. For example, railroad stocks within the Industrials Sector, are consistent long-term performers, but often have 10%+ corrections. This is a sub-sector to consider when that happens.

It’s also important to not just look at the stocks that are in the news daily, as these names may not be at the best prices at which to make a purchase. Many of these names are well known and are recent winners.

Consider names that are suitable for your portfolio, have less price risk, and possibly more reward potential in the months ahead. Research on sectors such as Health Care, Utilities, Consumer Staples, and Telecommunications is worth reviewing.

At this point, I believe any market correction will be a temporary pause, likely followed by a return to upward momentum. It is clear that many good companies came out of 2020 stronger and more streamlined, which does help their future prospects.

I suggest you do your homework now. In today’s low interest rate environment taking advantage of market corrections is still the right move and being prepared for buying opportunities is often what separates successful investors from those that “freeze” at key market moments.

As always I’ll sign off with a quote relevant to the article: “Success is where preparation and opportunity meet.” — Bobby Unser Steven Mayo is a Vice President, Director, and Investment Advisor with RBC Dominion Securities Inc. (Member — Canadian Investor Protection Fund). This article is not intended as nor does it constitute investment advice. Readers should consult a qualified professional before taking any action based on information in this article.