Stock market info, such as low market performance expectations and hidden value, can point to buying opportunities. However, there’s a lot more to it—and here are some additional tips.

Some stock market info can reveal a “double-barrelled buying opportunity.” This occurs when the two factors below come together:

1. Investors generally are fearful and have low expectations for market performance; and
2. There’s a lot of hidden value in the stock market—that is, value that’s not yet evident in the economic or business statistics.

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Stock market info: Two factors that improve your chances of making money

When investors are fearful and have low expectations, stock prices tend to be on the low side, relative to value. They can rise by merely getting back up to average. Hidden value, a key facet of our Successful Investor approach, also works in your favour. Hidden value should eventually start to generate profits, spurring a rise in stock prices.

Each of these two factors improves the odds that prices will go up after you buy. Note, though, that we’re talking about a “buying opportunity,” not a guaranteed profit. Keep in mind as well that the combination may need time to pay off.

A classic example of this stock market info in action

The classic example of this “double-barrelled buying opportunity” came after World War II. When the war ended in 1945, many advisors and investors were glum. They expected that when the troops came home and military production shrank to peacetime levels, joblessness would soar. Many thought the world would sink back into another 1930s-style depression.

Businesses saw things differently. They recognized the public’s vast pent-up desire for consumer goods. People were eager for the things they couldn’t have in the 1930s Depression and the war. Returning soldiers were eager for jobs that would let them get on with their lives. Companies were eager to hire so they could step up production of civilian goods. All this led to unexpectedly fast economic growth, starting in the late 1940s. Full employment and soaring stock markets followed.

While the boom was going on, you’d often hear that stock prices had gone up too high, and were headed for a crash. But the boom and market rise lasted into the early 1970s, far longer than most people expected.

By then, oddly enough, most investors had forgotten their doubts. In fact, many observers expected a whole new post-war boom after the U.S. pulled out of the Vietnam War in August 1973. Instead, the market went into its worst plunge since the Depression. The stock market recovered from that plunge, but stayed below its 1960s highs for another decade.

Prices rose and fell, but stayed within a broad range. In fact, it’s fair to say that the stock market stagnated between the end of the 1960s and the early part of the 1980s. However, corporate profits kept piling up in company accounts. In addition, the value of real estate and other assets kept rising, thanks to inflation. As the 1970s progressed, in the midst of this negative investor outlook, stocks built up a great deal of hidden value.

Investor sentiment was so depressed at that time it could hardly get worse. President Ronald Reagan had a new approach that seemed it just might work. It looked to us like another case of low expectations and high hidden value, so a rerun of the post-war boom was possible.

Stock market info: Improve your chances of making money with diversification

You will improve your chances of making money over long periods, no matter what happens in the market, if you diversify your holdings across most if not all of the five main economic sectors: Manufacturing & Industry; Resources & Commodities; Consumer; Finance; and Utilities. That’s a key part of our Successful Investor philosophy.

Finding and holding long-term stocks is also one of the main investment goals of the Successful Investor approach. While it’s certainly a strategy to buy and sell stocks for short-term gains, we feel that top-quality long-term stocks will gradually accumulate stock market profits over decades. And because you’re investing for a long period of time, short market fluctuations have very little impact on long-term gains. That makes for a less stressful investment strategy.

Four key points to sum up the basics of successfully investing in the stock market

Successful investors need to limit their involvement in trouble-prone areas like new issues, start-up companies and illiquid investments.

They need to stay out of companies in which they have doubts of any sort about the integrity of insiders.

They also need to recognize the special risks of investing in fashionable or excessively popular minefields such as Internet stocks in the late 1990s or income trusts in the 2000s.

In fact, you could sum up a lot of the basics of successful investing in these four key points:

• Don’t depend on luck to make money for you or to prevent losses.
• Be skeptical of the claims and recommendations of brokers, promoters or anybody else with a vested interest in a particular investment.
• Don’t do anything stupid.
• Win by not losing.

What pieces of stock market info have the strongest ability to persuade you to buy or sell?

Have you had any luck with “double-barrelled buying opportunities” in your investing career? What do you think contributed to that success?