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What the stock market and Christmas lunch have in common

Credit: open-arms

There are many things to love about Christmas. Time with family is lovely and presents for most people are wonderful. For me, one of the best things is the incredible food.

Whether it’s ham, turkey, prawns, chicken, salads or pavlova that tickles your fancy, it’s all there on the table.

So, which one should you pick? Which one? How about all of them! Then you won’t have a fear of missing out.

Tasting all of them sounds like a good idea, but we have a wonderful tendency to overeat on special occasions – especially Christmas.

So, what does all this have to do with the stock market? Am I just writing an article about how excited I am for Christmas lunch? Sort of.

The stock market is kind of like the Christmas lunch table. There are many industries (foods) to choose, some will likely always be a winner, whereas some could be a bit hit and miss.

I think the healthcare industry is a great sector, it has defensive earnings and a growing earnings profile. Ham and turkey are must-haves if you like meat. Think of Ramsay Health Care Limited (ASX: RHC) as the Christmas ham.

However, there are other foods that some people will either love or hate, like prawns. I think of small caps like prawns, for some it’s their specialty. Personally, I love prawns and I also think most investors will have a good experience with WAM Microcap Limited (ASX: WMI) and National Veterinary Care Ltd (ASX: NVL).

Here’s the serious point. Overeating at Christmas can leave you feeling bad for hours or even until the next day, which could ruin your Christmas day. Overeating with the share market can also be a dangerous move.

The Australian and American share markets are trading at the highest point for many years. The American market keeps hitting all-time highs. Growing earnings somewhat support this growth, but the price/earnings ratio is rising.

This graph is a perfect illustration that the p/e ratio is essentially the highest it has been excluding crash events.

Foolish takeaway

To avoid overeating on the share market it may be wise to take some profits off the table, or at least build up some cash for future opportunities.

Having said all that, I’m sure I will end up eating more food than what’s good for me.

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Motley Fool contributor Tristan Harrison owns shares of NATVETCARE FPO, Ramsay Health Care Limited, and WAM MICRO FPO. The Motley Fool Australia has recommended and owns NATVETCARE FPO. The Motley Fool Australia has recommended Ramsay Health Care Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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