How to Invest at a Record High: National-Oilwell Varco, Inc. (NOV), Joy Global Inc. (JOY), Caterpillar Inc. (CAT)

Tip 2: Even in a high market, there are still bargains.
Just because a major benchmark hits a high doesn’t mean that everything is expensive. Shopping in beaten-down corners of the market can unearth smart buys.

One such area involves commodities. The global slowdown has indiscriminately hammered many promising companies in the energy and natural-resources areas, as fears of overproduction and supply gluts have created overhangs in formerly hot markets. But if the market’s highs accurately reflect an economic rebound, then the best companies in these sectors should flourish. National-Oilwell Varco, Inc. (NYSE:NOV) stands to benefit from greater levels of energy-related activity, as it will mean selling more of the pipe and other drilling supplies it provides for exploration and production companies. Similarly, Joy Global Inc. (NYSE:JOY) and Caterpillar Inc. (NYSE:CAT) stand to gain from higher demand for the heavy equipment that mining companies need in order to unearth natural resources. Yet all of those stocks trade well off their yearly highs and have reasonable valuations to boot.

If you don’t like commodity-related plays, you can find other opportunities. The key is to start thinking like a value investor and realize that pockets of good value still wait to be discovered.

Tip 3: Trim unsustainable high-flying stocks.
Conversely, if the market has bid up a stock beyond belief, trimming down your position makes sense — but only if you think its gains are unsustainable.

Too often, investors ignore that caveat and end up selling a high-flying stock early in its cycle. Countless times, Priceline.com Inc (NASDAQ:PCLN) presented investors with compelling reasons to sell out, most notably during the big recession in 2008 and 2009. Yet the company’s competitive advantage persisted, leading it to much greater gains than its industry peers.

So don’t sell automatically just because stocks are at record highs. The best reason to sell is a threat to your long-term investing thesis behind the stock.

The article How to Invest at a Record High originally appeared on Fool.com and is written by Dan Caplinger.

Fool contributor Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends National Oilwell Varco and Priceline.com. The Motley Fool owns shares of National Oilwell Varco and Priceline.com.

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