In the gloomy (optimistic from a buyer’s point of view !) scenario the market will place strong dividend paying stocks at the top of the list, it will go for the proven quality, in a descending pyramid down to the highest risk counters. Thus the mid cap and smaller cap indices tend to be hardest hit in bearish downturns. Some argue that in recent times a proliferation of smaller cap managers have driven PEs and Yields on smaller to midcaps to the same valuation metrics as their far larger blue chip brethren, an over pricing, and thus higher risk. The hardest hit again, are companies which have not yet developed into cash flow businesses and are not yet paying dividends, however strong the prospective fundamentals may appear. We have previously discussed Compass Resources in this regard. We like the fundamentals, but the price will fall in the type of downturn that may be ahead. And of course, even better entry prices would arise were this to occur.
CMR Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held