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The stock market has been weak. And the value of Bitcoin is also well down from its highs when measured against other currencies such as the dollar and the pound. And many cryptocurrency investors have been betting that it will stage another comeback and shoot right back up again in value.
But I’m not tempted. The dearth of meaningful fundamentals has always put me off the crypto market. However, that’s clearly been a big mistake. And that’s because if I’d invested in Bitcoin early enough, I’d be a lot richer!
Nevertheless, I’m sticking to my stubborn approach of ignoring cryptocurrencies because there’s a big opportunity in the stock market right now.
The bear market beneath the surface
Many shares have fallen a long way in the bear phase we’ve been seeing. It’s not unusual to find stocks that have plunged by 30%, 50%, and even 80% in some cases. But those brutal declines have been masked by the general indices such as the FTSE 100. Indeed, the Footsie has held up quite well. And that’s because its not equally weighted between its 100 or so constituent stocks.
Instead, a few companies with vast market capitalisations tend to drive the movements of the index. For example, the biggest firms in the index include the mining business Anglo American and oil giants Shell and BP. Pharmaceutical company AstraZeneca is also a big player, alongside banker HSBC and fast-moving consumer goods business Unilever.
If the share prices of stocks like those don’t crash by 80%, neither does the FTSE 100 index. And it’s the same in the other direction as well. Some of the smaller companies in the Footsie can perform very well, but they hardly move the dial of the overall index.
Time to research and analyse
Therefore, despite the relative strength of the FTSE 100, it’s possible that down-moves may have gone too far for many stocks. I’ve been observing for sometime that share prices appear to be disagreeing with the often positive news flowing from businesses. However, that’s not always the case. Sometimes share prices plunge and news flowing from businesses confirms that trading has been deteriorating in the enterprise.
Nevertheless, the big opportunity I see in the stock market right now is the chance to try to find stocks that have been dumped unfairly by the market. And that means, to me, that conditions are perfect for business-minded investors to apply their research and analytical skills.
There are some bargain valuations around that understate the true worth of businesses. All I must do is double down my efforts to find them.
However, even though there is opportunity, it isn’t easy to take advantage of it. Sometimes my judgement will be wrong and the shares I pick won’t go on to perform as well as hoped. Nevertheless, I’m prepared to embrace the risks in the pursuit of long-term gains. And that means working hard to execute my strategy right now.