Why Investors Need to Let the Model Drive

Jordan Kimmel  |

It is amazing how easily reconceived knowledge, or sometimes the lack of it, can keep you from making profits in the stock market. Real and very obvious trends develop, and even when they are clear to others, you can miss them. This happens because you are stubborn and think you know something or are smarter than the market. Even having a model like The Magnet® Stock Selection Process, I need to be reminded sometimes to “let the model drive”. This time it took a 50-foot sign!

I saw the sign this week! No kidding--I saw the sign! It was on the NJ Turnpike, and it was a sign basically saying all the state parks were full. What did I think of when I saw the sign? That Winnebago ($WGO) has been a top-ranked Magnet stock for over two years--and I never invested in it! Instead, I was thinking about gas prices, the economy…whatever I was thinking about. I should have just bought the stock when WGO showed up near the top of the Magnet spreadsheet and broke a downtrend on heavy volume. It has more than doubled already. We are long the stock now in Magnet AE. (The first stocks that double in a bull market are often the ones to double again!)

The meaning of the sign on the highway went deeper for me and I realized that for over 25 years Magnet has continued to identify new and timely ideas through so many market conditions that I just need to let it drive. If you can identify a few market leaders very early in their cycle, it can change lifestyles. You also need to identify when a market leader is beginning to lose its power. I began thinking, why should I try to “trade the market signals” and get caught up in the noise with others?

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My first book, Magnet Investing, showed a few examples of how I traded stocks that should have been left to compound. Even my best trades look small in the rear-view mirror. The right stocks will double and double again if you are patient. But eventually all great stock moves end and then you need to be able to disengage. If you can get a two or three year (or more!) run with a true market leader it can make a huge contribution in your overall returns. Even now I find myself using technical tools too much to trade around positions. As long as a company ranks highly on Magnet…it usually has plenty more to go. Here’s to a long profit ride…

Learn more about Jordan's books Magnet® Investing and The MAGNET Method of Investing here.

This article has been prepared solely for informational purposes, and is not an offer to buy, nor sell or a solicitation of an offer to buy or sell any security, product, service or investment.  The opinions expressed herein do not constitute investment advice and independent advice should be sought where appropriate.  All information and opinions expressed herein are current as of publication and are subject to change without notice.

Jordan Kimmel may be trading in these stocks in Magnet AE.

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