Will Rogers was adored in his era as both an actor and as a humorist. Not surprisingly, because of his common sense, or “horse sense,” he was also known as a terrific investor. To paraphrase* one of his quotes, he liked to say, “I only buy stocks that go up and if they stop going up, I sell them.” A true momentum investor before the phrase was common place! Each bull market is led by new names, and as one of today’s best investors, William O’Neil, likes to remind everybody, the last bull market leaders rarely lead the next.
Magnet® Stocks score up highly, currently, on a variety of 19 variables that rank companies on value, growth, and momentum. I am not interested in the potential of “story stocks” nor am I interested in prior winners that “maybe turning around again.” Either the company you are investing in has current growth in sales, margins, or cash flow, or it doesn’t. Either your shares are being accumulated by institutions and your share price has current positive momentum, or they don’t. Try to think like Will Rogers and keep it simple.
If you are willing to invest in individual stocks, it is important to continue to monitor your holdings and make sure they continue to make progress from a fundamental basis. It is important not to fall in love with any holding no matter what industry they are in or how well you think you may know the company. Any company can decline significantly enough to ruin your overall investment results because no company is immune to going out of business. There are too many examples of former industry and stock market leaders that have gone belly up. It is hard to imagine, with the world building ever taller skyscrapers, that a former market leader Bethlehem Steel is bankrupt. In another striking example, if you would have stuck to your guns and stayed with the former airline leader Pan Am, despite the recent bull market in airline companies, you would have already lost all your money.
Make sure to remember that not investment ideas work out. Of course that is obvious, but some people’s ego gets in the way. Despite my deep conviction in my Magnet Model, I monitor each portfolio holding to make sure it still ranks highly, regardless of how it ranked when it entered my portfolio. I have also learned to use stop losses to keep me from falling in love with any company. Will Rogers loved to ride and own horses. He was known for his loyalty and his kind treatment of his horses. He was also smart enough to only ride healthy horses. Remember that when you look unemotionally at your stock portfolio.
Longs: Gilead Sciences Inc. (GILD) , Federated National Holding Co. (FNHC) , Omega Protein Corp. (OME) , Cal-Maine Foods, Inc. (CALM)
By Jordan Kimmel, Chief Investment Officer at Investview, Inc. (INVU).
*Editor's note: The exact quote goes, "Buy stocks that go up; if they don't go up, don't buy them."