Friday, December 10, 2004


Many famous investors including Warren Buffet have said in one way or another to Zig when others Zag. The way John Kenneth Galbraith said it was, "In economics the majority is always wrong".

For the past few months, Americans have poured money into international stock funds. Yep, there is now a stampede! Indeed, selected international funds have done extremely well for three years now. But, stocks stock can go way too high when they start to trade on emotion and entire funds do the same. It may not be the best time to sell international funds yet but it is certainly not the best time to buy them.

Guessing the exact best time to sell the stock or fund trading on emotion is impossible. Often the best thing to do is to scale back gradually. Make some big money but leave some big money to others. Over the past several months in monitored accounts, we have been gradually selling international funds.

On the other hand, it is relatively easy to buy the stock or fund that is not trading on emotion. You just have to be a patient enough to let the emotion die down.

Specifically, Americans are pulling money out of health care funds and avoiding shares in consumer product companies. The news for health care stocks has been relatively bad for a long time. Everyone knows about the potential law suits against MRK and PFE. I have been spending some time looking at health care stocks for future purchases. JP Morgan recommends CMX, TEVA, DVA, BIIB, and MLNM.


The front cover of Business Week is a picture of a crumbled Coke can. I have not read the article but historically when a business is bad enough to make the front cover of Business Week, the worst is over. For several weeks, I have suggested that the next strong moves will be in consumer staple stocks and in health care stocks. CL, PG and others are showing strength. I have expressed my preference for Pepsi over Coke but, again, I believe the whole group will do well. Wal Mart is another recent purchase. These "big, dumb, and ugglies" will keep on making money when higher interest rates cause other stocks to stumble. The internet companies should also continue to grow even in the face of higher interest rates. I am itching to buy more Google, Ebay, Yahoo or Amazon but the total size of these positions in my accounts has gotten quite large.