Buy on dips

Hi all,

The market has continued to rally strongly since my last post. I am still a buyer of dips but most of my investment went in, when the ftse was 4800 to 5000 and the Dow 9800 to 10000. As you can see from the chart below, I think we are in a bull market channel at the moment. And even though equities are starting to look overvalued in certain areas, money printing from the US and other central banks could push this market higher to the top of the channel above even 1300 on the S&P.



However from my own investment perspective, I become more cautious as we go higher. So far my investment portfolio is up 9%(after tax) YTD, vs. my cash holdings which are only going to make 2.5%. I want to protect my gains and look to buy on dips into shares that are undervalued by Mr Market.

I sold half of my BP holding at £4.40, as it became 7% of my portfolio - it rallied from £3 to £4.40. Although I think BP is a buy at its current price, I do now want to have all my eggs in one basket because that is where I have suffered in the past.

So I then bought HSBC, with the money from BP. I think they are undervalued and the strongest European bank. They have both growth in their core markets, mainly from Asia and they offer the prospect of growing their quarterly dividend payments. Of course there is still a risk the financial crisis will come back but I think they have the best chance of surviving a 2nd round, if it happens.

I have also invested more into Japan. This is my contrarian pick for the next few years. Japan shares are written off and have been for almost 20 years. But I think this is the time to buy. Everyone ignored gold and wrote it off and look now? This is why I buy when everyone else is selling.

I will update further in the next few weeks. Stay nimble and be careful out there. Do not risk more than you can afford to lose.