With the onset of summer many investors have become preoccupied with golfing, vacations, school break and BBQs. Over the years I have noticed that investors tend to lose their competitive edge and investment zeal as the thermometer edges towards 30° C. And really who can blame them?

This year, with the normal summer seasonality and the continuous flow of corporate profit warnings, missed revenue targets and investment analyst downgrades, investors have become quite skeptical and gun-shy. Stock prices have started to drift downward. In fact, the TSE 300 has fallen over 12.7% year-to-date and generally investors remain either frozen or rather complacent. But it is not as if there has been massive selling of securities in the market place; rather there is an absence of buying which has precipitated these price declines.

As a fundamental analyst the current state of the market both intrigues and excites me. Firstly, with this summer drift there is little competition when purchasing a particular security. A motivated seller for instance, with little demand for his shares will often liquidate stock at a considerably lower price than originally contemplated. Secondly, new financings, index and portfolio liquidations, etc. often present excellent purchase opportunities to the enterprising portfolio manager with cash and stamina. Ultimately this summer seasonality frequently leads to significant future portfolio gains.

Of particular interest to me right now is the preponderance of company profit and revenue warnings accompanied by investment analyst downgrades of earnings estimates. This psychologically negative environment is providing many interesting investment opportunities. This fact is particularly true for common stocks which may be reclassified from "buy" to "hold". My feeling is that now is a great time to research many of these fallen angels. The key, I believe, is that portfolio managers must not be mesmerized by the current summer seasonality. We must remain alert and ready to pounce on any extraordinary buying opportunity.