This Is When Great Investors Shine


Now that it seems ever more likely that the U.S. could go over the fiscal cliff, it's important for investors to ask themselves: "Am I getting greedy or fearful?" While I have no idea whether or not we will fall off the edge, this may be a great opportunity for average investors to set their emotions aside and start making money. But based on today's market reaction -- the Dow Jones Industrial Average has dropped 166 points because a bill that had no chance of survival in the Senate, much less on the president's desk, wasn't even voted on -- I will go out on a limb and say that if we go over the cliff, stocks will drop for at least a short time.

So because I believe stocks may get cheaper in the future, I'm personally feeling greedy right now. If you're a long-term investor, the majority of your holdings are likely in strong companies that will be able to weather any storm that may lie ahead. So sit tight and ride it out. However, you should still watch the market and have a list of top companies that you would buy if their price fell.

And why wait? Let's take a look at some of today's Dow losers. With every single one of the Dow's 30 components trading in the red today, there's no shortage of stocks trading lower than they were yesterday.

The two Dow banking stocks, Bank of America and JPMorgan Chase , both rank among the biggest losers today, down 2.4% and 1.3%, respectively. However, they have performed wonderfully over the past year. Bank of America is up 107%, while JPMorgan has gained 34% year to date. Whether or not the housing market and the economy grow stronger in the weeks or years to come, both of these companies will move in tandem with the broader economy. I own both of these stocks, and any major drop for either share signals a great buying opportunity to me.

While Bank of America has been the best-performing Dow stock this year, Hewlett-Packard has been the worst, down 44% year to date. Today, its shares are down another 2%, while fellow Dow technology companies Microsoft and Intel have lost 2.2% and 1.8%, respectively. All three companies have taken hits this year as demand for the PC has shrunk. While they're all tightly connected both to that industry and to each other, that doesn't mean the downfall of one company would spell doom for them all. Microsoft and Intel have much stronger balance sheets and have products in nearly every PC sold, while Hewlett-Packard needs to differentiate its PCs from a hundred others that are almost exactly the same. Speculating on Hewlett-Packard over the long run may burn you, even if the price drops to insanely low levels.

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Fool contributor Matt Thalman owns shares of Microsoft, Bank of America, and JPMorgan Chase & Co. The Motley Fool owns shares of Bank of America, Intel, JPMorgan Chase & Co., and Microsoft. Motley Fool newsletter services recommend Intel and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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