Stocks

Stocks for the Long RunThis is a list of stocks that Fundamental Trends subscribers generally hold for extended periods. On rare occasion we might trade short-term on news or large price swings, however, we are generally on a 3 to 5 year time horizon. People who are looking to trade frequently are genearlly making a mistake. Not only are trying to trade against super computers, hedge funds and investment bankers, they are destined to miss the biggest moves by being "out" when something happens and they wake up to see the news and stock price move too late.

Our core criteria for buying any stock is that we believe it can double in price within five years as a worst case scenario. We believe in building in a "margin of safety" on each purchase.

Most stocks will be released to the public once we are done accumulating a position, generally four to twelve months after initial purchases are made. Often we will use selling cash-secured puts to build a position. Those trades are noted in the Options section. 

Many people will build a 20-30 stock portfolio over a few years and then slowly replace expensive stocks with cheaper stocks. It is a process designed for the patient, thoughtful, forward looking and emotionally controlled. Asset allocation is a seperate issue. Some subscribers buy nothing but stocks, but most blend with an ETF allocation. I recommend blending an ETF portfolio with a stock portfolio. Read the guide you get when you subscribe to learn how to build an asset allocation that is right for you.

Your strongest edge as an investor is the ability to evaluate a company and let the calendar work for you. Not only can you beat the market that way, but you can do other things with your time.

ol·i·gop·o·ly

ˌäləˈɡäpəlē/

noun

noun: oligopoly; plural noun: oligopolies

  1. a state of limited competition, in which a market is shared by a small number of producers or sellers.

The defining characteristic of oligopolies is that pricing power is concentrated with few suppliers of the good or service. This is the case with the DRAM semiconductor market. 

Summary

The next several weeks into earnings season could be rough.

Duration is running out on a few calls.

A big rally is likely in store for year-end.

I am making some subtle moves within portfolios to accumulate a bit more cash, with the intention of reinvesting in the next several weeks.

Summary

EXAS is on a huge rally due to Pfizer deal.

The deal is a result of weakness though, not strength.

I still believe EXAS makes it to $100/share in the next few years, but the easy money has been made.

EXAS is at the top of trading range and should not represent more than about 2% of your overall holdings now (and zero is fine).

Exact Sciences (EXAS) recently cut a marketing deal with Pfizer (PFE) for Cologuard. That will greatly improve the market penetration of Exact's highly effective and noninvasive colon cancer test. As a result, short sellers have been covering their positions, driving the stock nearly straight up the past few days.

Summary

One of the best ways to get an understanding of a company is by learning its industry.

In this example, we see how companies in the Permian are gearing up for higher production by summer 2019 as more pipelines come online.

Some journals are cheap, some are expensive, take the free trials, but be diligent about canceling to conserve expenses.

Diamondback Energy is covered in this natural gas journal. I apply the information to one of our holdings, Occidental Petroleum.

Best advice I ever got

Jim Rogers: Read everything

Jim Rogers: Read everything

Best advice: Gates on Gates

Age: 66 - Investor and commodities guru: The best advice I ever got was on an airplane. It was in my early days on Wall Street. I was flying to Chicago, and I sat next to an older guy. Anyway, I remember him as being an old guy, which means he may have been 40. He told me to read everything. If you get interested in a company and you read the annual report, he said, you will have done more than 98% of the people on Wall Street. And if you read the footnotes in the annual report you will have done more than 100% of the people on Wall Street. I realized right away that if I just literally read a company's annual report and the notes -- or better yet, two or three years of reports -- that I would know much more than others. Professional investors used to sort of be dazzled. Everyone seemed to think I was smart. I later realized that I had to do more than just that. I learned that I had to read the annual reports of those I am investing in and their competitors' annual reports, the trade journals, and everything that I could get my hands on. But I realized that most people don't bother even doing the basic homework. And if I did even more, I'd be so far ahead that I'd probably be able to find successful investments.--Interview by Brian O'Keefe

Summary

Look at the big secular trends and embrace them - the future is coming fast.

Old economy, high capital, no moat is a catastrophe waiting to happen - sell your grandpa's stocks.

Find high ceiling stocks within strong secular sectors, build a position, be patient.

I get a l common question from new members to my investment letters: what should I do right now to get started? So, here's some answers: