Right off the top I'm going to reveal my motive for writing this article. I'm actually trying to create a "Contrarian Contango" (let it be known and let history record that I have just coined that expression).
What is a "Contrarian Contango"? My definition is "telling everyone it might be too early to start buying in the stock market hoping that it will trigger a bear market rally".
From your own experience you know quite well if you want a stock you own to go up, just sell part or all of it. If you want a stock like Republic Services (NYSE:RSG) to go down, just buy some like I did the other day.
Sure enough, RSG just keeps on going down even though Bill Gates bought a zillion shares at a higher price than I did.
And to make matters worse (or better, depending on your point of view) Jim Cramer is telling his minions that they should sell RSG and buy Waste Management (NYSE:WMI) instead.
If you've read my column, The Money Rumor Mill you know that I'm a lousy market timer. You also know that I'm fascinated with the psychology of investing and the art of spotting "bargains" in the markets.
I've looked at the balance sheet of the two companies (RSG and WMI) and all I can conclude is that WMI is a bigger company. If you think "bigger is better" than WMI would be your choice too. Both companies look attractively priced.
That being said, their profit and operating margins are quite similar, and RSG is selling below book value while WMI is selling at almost twice its book value.
When it comes to Return on Equity and Quarterly Earnings growth (year-over-year), RSG also appears to be the winner.
Getting back to "Contrarian Contango", we need to consider another strong possibility. Some very savvy market technicians are saying that the major indices will be lower by August 2009 than they are now.
But the "good news" is they are also saying we are about to have a meaningful "bear market rally". The "bad news" is they been saying that as the market has free fallen from their late December 2008 levels.
So what is a stock investor to do? Maybe you could just wait until the stock market has turned the corner and started a nice, multi-week rally. Or maybe you should do like Mad-man Cramer says and choose the company with the highest dividend (I understand that is why he recommended buying WMI and selling RSG).
As far as I'm concerned, and since I still own shares of companies like NYSE Euronext (NYSE:NYX) Texas Instruments (NYSE:TXN) and Dupont (NYSE:DD), I hope that by writing an article entitled "Too Early To Buy Anything?" that I enrage the gods of Wall Street and that a huge, unexpected generous bear market stock rally ensues.
I know and I can hear some of my readers say, "Be careful what you wish for." With that thought I in mind I will end this article and wish you "The Best of Good Buys" as Paul Kangas on the Nightly Business Report always says at the end his show.
