Fortunately my portfolio management methods don’t revolve around frequent trading. One of my kids came up to me recently and said, “What did you do today, Dad?” I said, “I made one trade, and I did a bunch of research.” He then asked, “How often do you trade?” I answered, “That was my first trade in a week, and I haven’t traded much in the last two months, but that’s not normal. There is no normal for me. When the market is really volatile, I trade a lot more, selling when stocks are rising, and buying when they are selling off. When the market is relatively placid, I don’t do much.” He looked at me, kind of smiled, and moved on. Information overload from Dad.
Most people and investment managers trade too often. They sell their winners too rapidly, and panic too soon on their losers. Now, I’m not advocating “buy and forget,” or Buffett’s statement, “Our favorite holding period is forever.” Buffett has had a huge opportunity loss on many of his “permanent” holdings. Granted, when you are managing that much money, it is tough, so I give him a pass, not that he needs it from me. (Rather, I am the needy one. If you ever read me, Mr. Buffett, sir, would you send me an e-mail? I have one favor to ask.)
Measure twice, cut once. Risk control is best done on the front end, analyzing what you will buy, rather than having strict sell rules that limit losses. Many who have strict sell rules die the death of a thousand cuts. Careful selection matters more, in my opinion. What should you aim for at present?
- A strong balance sheet
- Cheap price versus earnings and book
- An industry that is needed even in bad times.
- Earnings quality — low earnings from accrual entries.
Well, at least that is what I am aiming for. The following tickers are my working list of buy candidates. If you have other ideas for me or readers, please post them in the comments. Thanks.
ABC ACE ACGL ACN ACS AEE AEP AGL AHL ALE AMGN APA APC ATI AWH BAX BCR BDX BG BHP BOBE BP CAH CB CNQ COO COV CPWR CSC CSL CTAS CVG CVS D DST DUK ECA ED EE EFX EIX ELNK EME ENH ETP EXC FE FIC FISV HELE HES HI HON HPQ HSC IMO IVC JNJ KCI MCK MDT MGEE MRO MUR NJR NOC NOK NPK NST NTRI OCR OGE PCG PCP PDCO RIG RLI SCG SJM SNPS SO SPR SPW SRE STJ SWY SYK T TCK TFX TGI TLM TOT TRV TYC UGI UL VAR VOD VZ WEC WGL WW XEL ZMH
Full disclosure: I don’t any of the above tickers, I am not short them either.