When in doubt, buy booze, babes and bullets
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By Andrew Snyder, TodaysFinancialNews.com
Baltimore — (TFN): As we get older, the list of regrets grows. It’s natural. The more days we put in, the more mistakes we make. Hopefully, the list of successes grows even faster, but today’s about the mistakes.
We’ll say it’s in honor of Tiger Woods, the last celeb to bit nibble the forbidden fruit.
We all have regrets. The house we should have bought. The car we shouldn’t have sold. The girl we should have taken to prom. Or the pilot we shouldn’t have trusted.
And of course, there are the stocks we should have bought and the one’s we never should have touched. The more you invest, the longer your list will grow.
For a good friend of mine, one of those stocks was JLG. Don’t ask you broker to try to find it. It was bought out a long time ago for a sizeable premium.
My good buddy found out about the company’s profit potential from a colleague at the office. It was one of those elevator-type conversations. Most of them never amount to a hill of beans, but every once in a while, they explode.
Of course, my friend, a conservative Depression-era penny pincher, never pulled the trigger. Instead, he watched for months as the stock climbed and climbed.
His pain was over the day OshKosh (NYSE:OSK) announced it would pay a sizeable premium for JLG. He lost out on triple-digit gains, but at least the old timer didn’t have to watch the action any longer.
I’ve been doing the work for him.
I first started covering OshKosh for TFN back in December, when shares were going for just $5.75 or so. Today, those same shares are going for over $40, an increase of 600% over the past year.
Why the big climb? Like a lot of things this year, you can blame Uncle Sam.
As a heavy-equipment manufacturer, OshKosh was in the right place at the right time when it came time to dump money into the fight in Afghanistan.
The Wisconsin-based company has scored hundreds of millions worth of military contracts over the last year.
And thanks to last week’s decision by the nation’s top commander, there’s a very good chance that action will continue through the next year, maybe longer. After all, thanks to the weekend’s political bantering, Obama’s 18-month plan for troop withdrawal has now turned into a three- or even four-year plan.
That’s good news for war suppliers.
The action brings me back to one of my long-time investing philosophies. When it doubt, buy booze, babes and bullets. There’s always a market somewhere.
Right now, investors are preparing for yet another “war bump,” taking advantage of the nation’s plans to take the war in Afghanistan to a new level. That means company’s like OshKosh and the plethora of defense-industry firms are worthy of a look.
As the nation sets its eyes on a recovery, contrarian investors have their eyes on defense. Throughout the country’s history, some of the best investing opportunities have come on the heels of major military moves.
*** Gold continues its downturn today. Although the dollar has weakened a bit this afternoon, gold speculators can’t find enough reasons to stop the bleeding on the bullion market. If you are holding an overweight position in gold and want out (can’t blame you), wait a day or two before you make your move.
We’ll see a couple or three days of positive action – just enough to dupe the markets – then the real selling will begin. As the world enters the New Year, portfolio shuffling and rebalancing are going to create all sorts of contrary phenomenon.
Gold’s downturn will be on the list.
*** Need to know when to unload your gold or any other asset? No problem. Stick with a tried-and-true stop-loss plan and you’ll see higher gains and smaller losses. It’s as close to a sure thing as you can get on Wall Street.
I wrote about the notion of volatility and stop-losses this morning on the TFN site. Here’s a bit of what I wrote:
“When it comes to investing, there are almost as many profit strategies as there are stocks to invest in. Everybody’s got their opinions, and many of them will make you money. But nothing is more agreed upon than the notion of a stop loss.
“Except, here at TFN headquarters.
“Last week, Christoph, Laura and I got into what turned out to be an hour-long discussion of our various exit strategies. It was interesting, to say the least.
“Of course, our opinions are highly biased. As marketers, portfolio managers and trading-service operators, our actions sometimes stray from our philosophies. I won’t bore you with the details of our discussion, but I will let you in on our conclusion.
“In this top-heavy, data-sensitive market, stop –losses are more important than ever.
“The basic notion of a stop-loss, setting a firm sell point, has been beaten to death amongst financial pundits. There isn’t an editor or advisor out there that has not written about or discussed the subject. But what many folks fail to tackle is how and when to set stop-losses. This was a vital topic of our discussion last week.
“I will let the others fill you in on their opinions. For now, I will give you the details of how I manage the idea of how to get out and when.
“There are two uses for a stop-loss, protecting an investor from significant losses and locking in gains in case a position turns around and heads south.
“Whether you use a plain-vanilla stop-loss or a dynamic trailing stop doesn’t really matter. What matters is at what price your exit is set to take place.
“For many investors, 15% is a popular stop-loss for conservative plays, with 20% or even 25% used for more volatile plays.
“With any stop-loss, volatility is an important, if not the most important variable. That’s why I propose a stop-loss strategy with volatility as the key determinant.”
Continue the article, here.
*** Finally, your question of the week: Should Ben Bernanke get another term or has he done more harm than good?
Original source for this article: Contrarian Profits
