When commentators talk about volatility picking up in the market, what they mean is that prices are moving lower. No one ever complains about upside volatility except a handful of short sellers. Volatility is indeed picking up a bit as prices are now down more than 5% from the highs. Before we get too excited, let’s keep in mind that in spite of the triple-digit down days we have seen the past week or two, so far this barely qualifies as a pullback in the market right now.
Defensive, conservative investors in particular should be ready with a list of stocks to buy if the market continues to be weak. For defensive investors, I like to use the Graham number calculation that takes into account both earnings and asset values to measure the worth of a company’s shares. I like to wait until I can buy the stock at about 75% of the Graham valuation. In conservative portfolios I want to own large companies with long track records, reasonable balance sheets and a solid history of paying and raising dividends: Horace Mann Educators Corporation (HMN) is a great example of the type of rock-solid conservative stocks defensive investors should consider if the market keeps falling in the weeks ahead. Private equity might not seem like a great investment for conservative investors but the large PE firms like KKR & Co. L.P. (KKR) fit the bill nicely.
Source: InvestorPlace
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