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Hello, Reader.
Happy Holidays!
With the New Year less than a week away, realigning your investment mindset with success as the goal is imperative.
Because many are the paths to investment failure; few are the paths to success. But every path to success shares one specific trait: It does not knowingly tolerate mediocrity.
Every successful investment strategy begins by removing mediocre stocks from the portfolio, or by never admitting them in the first place. Unless (and until) that step occurs, investment success is impossible.
So, today, to round out our four-part series (we’ll take this coming Saturday off), we’re going to revisit an October article called Now More Than Ever, the Trend Is Your Friend and talk about how to shed the “dead weight” of your portfolio, how to follow the money, and where your next investment opportunity could be…
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Avoiding “dead money” stocks creates a solid foundation for long-term portfolio growth. That’s why I recommend periodic portfolio reviews in which you critically examine each stock you hold and ask tough questions about it…
Is your original reason for buying the stock still valid, or has the story changed for the worse?
Does the stock truly offer market-beating potential?
Can you explain in 10 words why you own it? In other words, do you really understand why you own it?
Does the stock “spark joy” when you see it sitting in your brokerage statement? Are you happy it’s there, even if it may be struggling at the moment?
You get the idea: An “okay” stock is not okay… not at all.
If it’s going to take up room in your portfolio, and also room in your consciousness, it better be offering a return that is much better than just okay.
We’re going to get it wrong sometimes. That’s fine. That’s part of the investment process. But we don’t want to get it wrong because we were lazy – because we failed to sell a stock that never seemed very exceptional in the first place.
So that’s the first step. Bad stocks leave… in order to make room for good stocks.
After you’ve created some space, you can work on filling it again. Despite what the pop-up ads, YouTube mini-videos, and television commercials tell you, there is no absolute “right way” to invest.
Investing is not like the maze in your grandchild’s activity book that has only one way to arrive at “Candy Castle”… while all others lead to dead ends.
But investing is like a screening process; as long as you know a few things, like…
If the stock has the potential to give you double- or even triple-digit returns…
If the stock has a solid team of executives that will drive the company toward success…
And if the stock is part of a multiyear, lucrative megatrend…
… Then you’re on the right track.
The last of these factors is usually the most important, even for investors who never consider trends…
The Trend Is Your Friend
One of Wall Street’s oldest expressions is, “The trend is your friend.”
It’s an old expression that remains in use today… because it is true.
Big, powerful trends can create spectacular stock market winners, just like these past trends did…
The coordinated growth of emerging market economies of the early 1990s…
The industrialization of China in the late 1990s and early 2000s…
The e-commerce boom that followed the iPhone launch of 2006…
The global economic rebound that followed the Great Recession of 2008-2009…
The renewable energy boom that caught fire around 2016…
The Tesla-inspired EV boom…
And coming soon to every major company in the U.S., the artificial intelligence boom.
Megatrends like these produce mega stock market gains. The key is to identify them relatively early in their development, and then position your portfolio to benefit from them.
It’s no different than pushing a kayak into a stream to ride the current. Unless you move out into the current, you won’t go anywhere. Importantly, you don’t need the best-of-the-best kayaks to ride the current; you just need one that can stay afloat, and the current will do the rest.
In other words, if you have correctly identified the megatrend, and correctly identified a company that will benefit from that trend, you will make money. Period.
Wall Street has sold investors on the idea that they should start with “micro” analysis – the idea that they should make investment decisions by comparing data sets like historic revenue growth, price-to-sales ratios, Wall Street earnings estimates, etc.
But I do the opposite; I start with the “macro” analysis.
I look for big-picture trends that drive huge, multiyear moves in entire sectors of the market.
I’m talking about trends that can spin off incredible gains in just a few years.
Catching just one of these trends – at the right time – can help anyone accumulate enough capital to finance their dreams and to provide themselves with an enviable retirement…
And right now, I have one stock I recommend holding forever.
Okay, “forever” might be a bit of an exaggeration, but I highly recommend this stock as your next long-term hold.
I hate to be vague, but it’s just far too much to cram into this e-letter. So, I’ve created a short, but detailed, video presentation for you to check out on this very topic.
P.S. Unfortunately, it’s not all good news with this massive new change to our country’s future. Even though many Americans stand to benefit (and profit), many more stand to fall into financial ruin. Make sure you’re on the right side. Click here to learn more.
