Friday, January 29, 2010

No Tears in my Beer

Unless some miracle transpires in the final hours, it appears the major U.S. equity market indices will close down for the year. This ends a tough month of trading that wiped out most the anticipated “January Effect” that typically sends stocks higher as investors return to long positions after selling in the final days of December for the purpose of establishing tax losses.

While some investors may be looking stock prices and wondering what dark days may be ahead, there are no tears in my beer. I thought stocks were a little ahead of themselves as it was. A bit of a pull back - or even more a pronounced correction - creates attractive reentry points in some quality companies.

Telestone Technologies (TSTC: Nasdaq) is an excellent example. The stock had moved well beyond our price target in some frothy trading and now looks interesting again at 14 times trailing earnings. Recent FCC approval for sale of Telestone’s wireless connectivity products in the U.S. makes China-based Telestone an interesting play on the international communications market - but only at the right stock price.

We are also taking a second look at dividend plays. American Ecology (ECOL: Nasdaq) has been facing a drought in environmental clean-up of hazardous waste that has left its top-line weak. However, a consistent dividend policy gives investors a reason to be patient. The dividend yield at the current stock price is 4.5%.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein. Crystal Equity Research has a Buy rating on TSTC and a Hold rating on ECOL.

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