Thursday, June 02, 2005


A friend's $100,000 account became a $105,000 account today! The airline index was up 5.9% today but even this great number hides the big number. The legacy carriers were up better than 8% on average. To make sure you get the point, 8% is more than most investors will make in the average year. My friend owns three airlines and a variety of other stocks. Obviously it is a high beta account--a roller coaster account. He is having fun now and in the long-run he will make a lot of money. He is likely to average 14 to 18% return but he will have some years of up 40% and other years of down 25%.

A regular reader wants another "great pick". She has done well with the airlines but wants to know what is next. I responded that I am prepared to buy UAL when it comes out of bankruptcy. No, she should not load up with all airlines but her statement sounded like she is ready to move on to something else--a big mistake. The biggest mistakes I have ever made were in selling winners too early. I made more than 100% on Chrysler in two weeks and sold. I made over 100% in Dell in a few months and sold. The quick trigger on these and others have cost me millions of dollars.

Besides, we post at least one new stock every week. Most weeks we mention several stocks that we are buying. This week for example, in addition to our Stock of the Week selection, we purchased USG and WMT and reported the purchases. We also mentioned that we expect FON to sign a deal soon with at least one cable company. We expect the deal to be a "wholesale" deal where FON will supply the backbone and the cable company will sell combo VoIP and Cell phone service. We already have a significant stake in FON/NXTL. We may buy more.

USG is selling at less than 6 times earnings and WMT is at a discount to the S&P for perhaps the only time in the stocks history. Right now, one can throw darts at the stock page and do well. It is not as important what to buy as it is to make sure you don't miss the Bull Market. I have demonstrated to many groups that most individuals are better off using the dart board approach anyway. Even those who read my blog are likely to buy the hot stocks that get all the press rather than the seemingly dull Stock of the Week selections.

Our accounts are sitting on net new highs but there are hundreds of stocks that are no where close to net new highs. There are many stocks I would like to buy. We do not want to chase the top performers. We are happy to hold many stocks where we have doubles or more even if they are hot or not in the current market. We think many of them are great buys at the current price but why not buy something like WMT that is so out of favor that it has taken on the characteristics of a value stock. You can't go wrong by buying an MSFT in this market. It is the WMT of the technology sector. Companies like ORCL will do well sooner or later. If the market gets nasty, holders of WMT, MSFT and ORCL can ride out the storm. Those who only own the Googles and Yahoos of the world may get hammered.

Another thing to remember is that I am trying to add "clients". I do not charge to help folks with their portfolio but my goal is to help people. Writing the blog is my way of recruiting "clients". Inexperienced investors who try to manage their own accounts by reading my blog and others are going to be like the barber who tries to give himself a haircut. Only those people who truly love the "game" will stick through the years it takes to become a good investor.

Individuals need to learn enough to know what to avoid. Most should seek help in managing accounts.