Dear Fellow Investor

Have you been caught recently between thinking of running after the market recovery or holding back and selling into weakness in order to buy back lower prices.

I have and this is what I think.

I have the feeling that the market is moving higher while the underlying economies worldwide continue to deteriorate.

I know the stock market is a leading indicator but indicating what? A turnaround in six months? I do not see it.

I am selling weaker companies increasing the cash part of my portfolio a bit to 86% to to buy later at new lows.

Here is why:

1. US unemployment is still rising without any indication of slowdown. Not even the leading indicators of unemployment data such as hours worked and part time help are showing any improvement. See the insightful analysis of Barry Ritholz NFP Falls 663k

2. Bank problem loans are not over. In the US loan delinquencies of all kinds are still moving up and the commercial real estate market is weakening. In Europe the dreadful situation in Central and Eastern Europe is still deteriorating.

   The Financial Times in their Lex article on the Ukraine said:

   “It takes some doing for an economy to shrink by a third. But that is what Ukraine managed to do in January and February compared with last year. “

   “...emerging Europe’s problems arguably have more in common with Latin America’s debt crisis in 1982. Today, loans to central Europe by banks most exposed to the region account for 238 per cent of their capital bases, Citi estimates. That is half as much again as the nine biggest US lenders to Latin America in the 1980s.”

3. Unemployment in Germany has just started rising. DAX Index companies have moved from first announcing no lay-offs to reduced hours to forced holiday to ThyssenKrupp announcing the shedding of 3,000 positions at the end of March.

   Germany's unemployment rate rose to 8.6% in March from 8.5% in February, on a non-unadjusted basis. Seasonally adjusted the rate rose to 8.1% from 8%. This equates to 3.4 million people, an increase of 69,000.

4. The Q1 reporting season results are probably going to be dreadful. With profit margins at historical record highs last year there is only one direction to go. That along with falling sales is a recipe for disaster.

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P.S. A media company in the wrong country at the wrong time...

This month the company I found for subscribers is located in France.

In terms of the size of companies I look at its quite large with a market value of €1,72 billion.

The company owns the most popular television channel in one of the largest European countries but is also very active in new media channels including the internet, tablets and smart phones.

In spite of this, the market views it as an old media company that is soon going the way of the dinosaurs. However, when you look at its financial statements you will see what a great business it is.

Its balance sheet is solid with no debt, and it generates a high amount of free cash flow and profits. This enables it to pay a dividend of just under 7% that can easily be maintained and has room to increase.

When I recommended the company it was trading at 7 times free cash flow, 7,7 times 2010 earnings and 5,6 times EBIT to enterprise value.

I am sure you will agree this is undervalued.

To immediately get your hands on this value investment idea (for as little as €39) click here.