Long-term and short-term investing lessons “The Tortoise and The Hare” is misleading. In Aesop’s famous fable, the hare is a speedster who teases the other animals for being slow. The tortoise gets tired of the boasting and challenges the hare to a race. The race starts and the hare gets out to a huge lead. But he gets arrogant and decides he can just take a nap because the tortoise can never catch up. Meanwhile, the tortoise continues to plod along and eventually passes the hare … while he continues to sleep. The hare finally wakes up and is shocked to realize that the tortoise is just feet away from the finish line. The hare scrambles to catch up, but it’s too late. The tortoise has won. 
The moral we are taught from this is “slow and steady wins the race.” But that story is incomplete – and yes, it applies to your portfolio. What if the race were shorter? The hare would have won easily. This lesson applies to investing goals as well. Saving for your retirement is investing like a tortoise. A long slow grind, with minor bumps, but you eventually get to your retirement savings goal. That’s good investing. However, it’s not the only way to use your investing dollars. Some stocks can increase in value quickly and provide short-term profits. Maybe they are not the stocks you want to hold for 30 years, but they can do a lot for your portfolio in, say, 30 days. Profits can be taken quickly and be used for something other than the long-term goal of a prosperous retirement. And let’s face it. We could all use some more cash now. Inflation isn’t whipped yet On Wednesday, the government released the latest inflation numbers. While cost increases continue to come down, they haven’t met the 2% target yet. Prices climbed 2.6% from a year earlier, slightly higher than September’s 2.4% number but not out of line with expectations. After food and fuel prices were removed, “core” inflation held steady at 3.3%. But it’s important to remember that inflation is a measure of price increases, not actual prices. Inflation is down from the 9% number we clocked in August 2022, but the bottom-line experience for Americans is that everything remains more expensive. Food prices are a good example because everyone buys it regardless of income level, health spending or whether you own a house. According to the USDA Economic Research Service, from 2019 to 2023, the all-food Consumer Price Index (CPI) (meaning eating at home and eating out) rose by 25%—a higher increase than the all-items CPI, which grew 19.2% over the same period. Food price increases were below the 27.1% increase in transportation costs over the same four years, but they rose faster than housing, medical care, and all other major categories. Clearly, everyone could use more cash now. Why did you buy this stock? My Digest colleague Jeff Remsburg touched on this earlier this week. Some stocks are high conviction picks – stocks that you believe will be fantastic in the long run. So, if a market pull back occurs, you won’t necessarily be tempted to pull the trigger and get out. Other stocks are lower conviction picks – stocks that you believe have a tailwind right now. If the pull back is big enough, you’ll want to consider getting out. But the key point is that you can own both kinds – and they serve different purposes in your portfolio. Referring to the famous fable -- imagine if the race was just shorter? The tortoise won in the long run, but the hare made up a lot of real estate fast. The road to growing your wealth doesn’t have to consist solely of stocks that grind up and up over years and years. Some stocks exhibit characteristics that show that bigger gains can happen quickly. Investing in these kinds of stocks can supercharge your portfolio, and even produce income that can be used long before your “grinder” stocks really mature. Louis Navellier’s method to find market “hares” Louis has been called “an icon among growth investors” by The New York Times, so it’s no surprise that he focuses on only the best growth stocks on the planet. In his Accelerated Profits service, Louis focuses on discovering stocks poised for explosive short-term growth – stocks to hold for a short time as they hit their stride and surge upward. He has a decades-long track record of finding these kinds of stocks, using dozens of criteria. But for today, let’s focus on the three most important Louis uses to find stocks ideally set up for big gains in a short period. First, it must have stellar earnings. Not growth that’s achieved by cost cutting or stock buybacks, but real, sustained earnings growth. Second, they must demonstrate spectacular sales growth. Third, the stock must have a history of positive earnings surprises. On average, the stocks Louis focuses on for fast growth are forecasted to deliver earnings that beat expectations by 34%. Those big upside surprises can be a catalyst for sending these stocks soaring. Next, Louis focuses on his quantitative analysis – which stocks institutions are buying. As you can imagine, large institutional buys also can send stocks soaring. The next step is to wring out the risk. Here is how Louis describes that process. Despite what Wall Street has been telling you, you don’t always have to take bigger risk to get bigger returns. This system is specifically designed to reward stocks that beat the market and to punish volatile stocks. To accomplish this, my system uses a combination of volatility and “alpha” (a financial concept that measures how each stock performs compared to the market) to discover stocks that are going to deliver the biggest profits with the lowest risk. Stocks with that very special combination get A rated for risk/reward. As you can imagine, few stocks meet all these criteria. But it’s also easy to imagine how stocks that meet these criteria are ready to erupt in a short, powerful burst of hypergrowth. Here is Louis again: Only stocks that get A’s across the board—an A for fundamentals… and A for quantitative analysis… and an A for risk/reward—earn the coveted AAA-rating it takes to make our Accelerated Profits buy list. The select few that do offer mind-boggling sales and earnings growth, lower risk and have clear momentum that’s driving them higher. That’s how these rare AAA-rated stocks can deliver outsized growth in just three to twelve months. One final test must be passed before Louis recommends a stock. Louis evaluates this short list of stocks himself, to ensure that his subscribers only get the best of the best. Accelerated Profits subscribers can use gains from those stocks for groceries, health care, vacations, or anything else as the Federal Reserve continues to fight inflation. Slow and steady wins the race for long-haul investing, but shorter bursts can provide more cash in the short term. There’s no reason not to use both methods. Louis recently recorded a free presentation detailing how the system works and why we’re entering a market ripe for short-term winners. You can access the recording right here. Enjoy your weekend, Luis Hernandez
Editor in Chief, InvestorPlace | 
No comments:
Post a Comment