Warren Buffet suggested to pretend you only get 20 trades in building your portfolio. That is, over your entire lifetime of evaluating potential investments–only say “Buy” 20 times! Buffet reminds us the market will continually serve up pitches but you need to be so selective you pass on almost all of them.
Personally I liked to swing at almost any idea the ranks out highly on The Magnet® Stock Selection Process that flashed a “technical buy signal.” I have done this because I set “mental stop losses” to try to limit my losses on ideas that do not work out and because you never know which ideas will be the biggest winners. After all these years in the business, I have decided on a middle ground. I am only going to swing at quality pitches.
Buying quality sounds good, but how can you make the distinction between high and low quality. Ask yourself, “Is this company clearly one of the leaders in its sector or field of business?” Does the stock trade at a level where at least small institutions can buy in? Have at least a few institutions already taken a position in the stock? Does the stock trade above a hat size? I am not suddenly advocating buying “market favorites” but I have added an extra layer onto my Magnet Process. I call them Magnet Elites. I’ll share more of what makes them “Elite Magnets” or Magnet HQ in the next several weeks.
The rear view mirror provides great lessons! You need to learn from your successes as well as your failures. My best short-term profits have come from the smaller more speculative companies Magnet has identified when they were tiny emerging companies. However, the best long-term profits have come from those companies I was willing to hold through corrections. So while I’ll occasionally still see short term trades I want to make, my personal focus is now on the highest quality companies. Less trades, more quality pitches!
Longs: ARRIS Group, Inc. (ARRS), Emerge Energy Services LP (EMES), San Juan Basin Royalty Trust (SJT)
Shorts: NetSuite Inc. (N), Teck Resources Ltd. (TCK), AdvisorShares Ranger Equity Bear ETF (HDGE), Direxion Daily Small Cap Bear 3X ETF (TZA)
By Jordan Kimmel, Chief Investment Officer at Investview, Inc. (INVU).
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