I think most of us would agree that individual stocks are heavily influenced by the market in general. No matter how fantastic a company and its earnings are, if the entire market is in a free-fall, an individual stock is going to have a tough time defying everything else.
Based on this, I've always subscribed to the "top-down" approach to choosing stocks; that is, starting with the big indexes, then industry groups, and then individual stocks.
Looking at my current holdings, however (of which there are nearly 200), it's hard to get away from the fact that, in spite of a wide variety of stocks from a reasonable different number of sectors, the short positions are far more compelling than the longs. The shorts look fantastic – – – if you didn't know what the market was doing, you wouldn't guess nearly 50% of the market had been chopped off already; these issues have tons of downside potential. The longs, on the other hand, are almost sympathy plays. They're decent, I guess, and might push up a bit, but on the whole they are pathetic compared to the shorts.
That's a difficult conclusion to reach, because looking at the broad market indexes, they seem ready to push higher. It's discomfiting, to say the least, to be looking at a stock market which seems poised to push higher yet find the vast majority of opportunities on the short side.
I sure hope things clear up with the new year. Things are just a mess right now.
