DJIA 7640.25 -41.97 (-0.55%) S&P 500 973.89 -8.37 (-0.85%) Nasdaq 1566.52 -5.43 (-0.34%) Value Line ndx 761.61 +1.62 (+0.21%) 30-Year Bond 103 6/32 +7/32 5.29% Yield
Fire in the hole! Gold mining stocks of all shapes and sizes struck it rich today, benefiting from several sources of positive news. First, the price of gold made some of its biggest gains in recent memory this week, helped in part by the declining value of the dollar against other currencies. Since gold is priced in dollars, any slide in the dollar enables foreign buyers to come into the market and get more gold for their deutsche marks or yen, helping to boost the commodity's price. Several wire services also reported that short sellers were covering their gold positions ahead of the holiday weekend, contributing to higher prices. Among the gainers, Newmont Mining <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NEM)") else Response.Write("(NYSE: NEM)") end if %> added $2 3/4 to $20, Barrick Gold <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ABX)") else Response.Write("(NYSE: ABX)") end if %> rose $1 1/2 to $16 3/4, Homestake Mining Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HM)") else Response.Write("(NYSE: HM)") end if %> advanced $15/16 to $12, Placer Dome <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PDG)") else Response.Write("(NYSE: PDG)") end if %> climbed $1 1/4 to $11 5/16, and Getchell Gold <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: GGO)") else Response.Write("(AMEX: GGO)") end if %> moved up $1 3/4 to $13.
Shares of electronic design automation (EDA) tools developer Avant! <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AVNT)") else Response.Write("(Nasdaq: AVNT)") end if %> jumped $2 1/16 to $13 7/8 today on news that rival Cadence Design Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CDN)") else Response.Write("(NYSE: CDN)") end if %> will buy privately held system-on-a-chip design tool maker Ambit Design Systems for $260 million in cash. The deal throws Avant!'s name into the ring as the next potential merger target in the rapidly consolidating EDA sector, which is positioned to take advantage of the advent of the much-ballyhooed system-on-a-chip. One rumored potential acquirer is design tools and verification systems maker Synopsys <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SNPS)") else Response.Write("(Nasdaq: SNPS)") end if %>, which gobbled up former EDA players EPIC Design Technology and Viewlogic Systems last year and ate privately held Systems Science for dessert in July. The speculation stole the thunder away from last night's news out of Cadence, which rose $5/16 to $22 13/16. Synopsys finished the day down $1/8 to $30 1/2.
PeopleSoft Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PSFT)") else Response.Write("(Nasdaq: PSFT)") end if %>, the number two provider of enterprise application software for business, gained $1 3/8 to $30 15/16 after reiterating its positive outlook for the balance of its fiscal year (and beyond) in a conference call last night. The company reaffirmed its expectation that total revenues in the third quarter will grow 60% year-over-year and that cumulative 1998 results will see top-line growth in the range of 60-65% compared with 1997. As well, PeopleSoft forecast 1998 operating margins in the company's target range between 18-20%. Nothing new here -- it seems that PeopleSoft just wanted to clearly articulate its present business position in the wake of six months worth of inquiries regarding its operations and the enterprise resource planning (ERP) market as a whole. Nonetheless, PeopleSoft's keen management of its diverse businesses may warrant a closer look by investors.
QUICK TAKES: Several oil and gas drillers/servicers/jacks-of-all-trades were up today, after crude oil prices hit $14 per barrel for the first time in over a month yesterday. Schlumberger <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SLB)") else Response.Write("(NYSE: SLB)") end if %> rose $2 3/4 to $50, Halliburton <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HAL)") else Response.Write("(NYSE: HAL)") end if %> advanced $1 3/8 to $29 1/4, Global Marine <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GLM)") else Response.Write("(NYSE: GLM)") end if %> picked up $1 1/2 to $11 3/4, R&B Falcon <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FLC)") else Response.Write("(NYSE: FLC)") end if %> tacked on $1 to $12, and BJ Services <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BJS)") else Response.Write("(NYSE: BJS)") end if %> added $1 7/16 to $17 5/16... Also, Diamond Offshore <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DO)") else Response.Write("(NYSE: DO)") end if %> climbed $1 7/16 to $23 5/8, Transocean Offshore <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RIG)") else Response.Write("(NYSE: RIG)") end if %> moved up $2 5/8 to $28 1/2, Ensco International <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ESV)") else Response.Write("(NYSE: ESV)") end if %> gained $1 to $13 1/16, and Noble Drilling <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NE)") else Response.Write("(NYSE: NE)") end if %> traded up $1 3/16 to $14 3/8... Oil and gas exploration and production company Bellwether Exploration Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BELW)") else Response.Write("(Nasdaq: BELW)") end if %> moved up $5/8 to $5 1/2 after announcing a $5 million share buyback plan, which will be funded through the company's internal cash resources.
Transportation logistics management company Ryder System <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: R)") else Response.Write("(NYSE: R)") end if %> hitched a ride $15/16 higher to $20 15/16 after receiving an upgrade to "outperform" from "neutral" from Morgan Stanley Dean Witter... Automotive safety systems designer Breed Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BDT)") else Response.Write("(NYSE: BDT)") end if %> climbed $1 15/16 to $8 7/8 after saying that a restatement of its financial results to take into account a previously announced $244 million repositioning charge "will not have a material adverse effect" on the company's previously reported financial results... Global positioning satellite (GPS) navigation technologies firm Trimble Navigation <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TRMB)") else Response.Write("(Nasdaq: TRMB)") end if %> picked up $11/16 to $10 5/8 after its board approved a continuation of its one million share stock buyback program, which had been suspended on Aug. 20.
Information technology consulting firm Cotelligent Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CGZ)") else Response.Write("(NYSE: CGZ)") end if %> rose $1 to $11 3/4 after announcing a plan to buy back up to 2 million shares, or about 14% of its outstanding common stock... Workstations and Java programming language developer Sun Microsystems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SUNW)") else Response.Write("(Nasdaq: SUNW)") end if %> shined $2 1/4 higher to $42 11/16 after J.P. Morgan reiterated its "buy" rating... Telecommunications products maker DSC Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DIGI)") else Response.Write("(Nasdaq: DIGI)") end if %> rose $1 1/16 to $26 5/8 after the Justice Department finished its antitrust review of the company's merger with France's Alcatel Alsthom <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ALA)") else Response.Write("(NYSE: ALA)") end if %> without taking any action.
Mineral and metals mining and smelting company Cominco Ltd. <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: CLT)") else Response.Write("(AMEX: CLT)") end if %> added $1 to $11 7/16 after announcing a 2 million share repurchase plan... Casual apparel retailer Gadzooks <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GADZ)") else Response.Write("(Nasdaq: GADZ)") end if %> gained $1 1/16 to $8 3/4 after the company distributed one preferred share for each common share outstanding, to ensure "fair and equal" treatment of its shareholders in the event of a takeover... Vending machine currency acceptance technologies firm Global Payment Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GPTX)") else Response.Write("(Nasdaq: GPTX)") end if %> moved up $1 11/32 to $6 1/2 after CEO Stephen Katz told Dow Jones that the company is performing in line with its 20% to 25% earnings growth plan for the year.
Private mortgage insurance provider Triad Guaranty <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TGIC)") else Response.Write("(Nasdaq: TGIC)") end if %> added $1 5/8 to $24 3/8 after being upgraded by PaineWebber to "attractive" from "neutral"... Bank holding company Delphos Citizens Bancorp <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DCBI)") else Response.Write("(Nasdaq: DCBI)") end if %> rose $3 5/32 to $18 17/32 after saying it will repurchase up to 92,420 shares, or 5% of its outstanding shares, over the next six months... Pediatrix Medical Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PDX)") else Response.Write("(NYSE: PDX)") end if %>, which provides physician management services to neonatal intensive care units (NICU) in hospitals, moved up $2 11/16 to $41 3/4 after agreeing to acquire a group of neonatologists in Wichita, Kansas.
General Electric <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GE)") else Response.Write("(NYSE: GE)") end if %> fell another $1 7/8 to $75 7/8 on concern that the turbulence rocking global markets will hurt earnings at the NBC parent, financial services provider, and diversified manufacturer of everything from aircraft engines and medical systems to lighting and household appliances. In fiscal 1997, GE derived 42% of its revenue from outside the U.S., with 41% of its consolidated operating profit coming from its foreign operations. In addition, the company's international financial results could be negatively impacted by the strength of the U.S. dollar against foreign currencies. Today GE announced it will spend $27 million on a new electrical parts plant in eastern Hungary. The company has invested $720 million in its main plant in Hungary since 1989.
Major banks and financial services companies continued their spiral downward on concern that the turmoil in global markets will cut into earnings. Citicorp <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CCI)") else Response.Write("(NYSE: CCI)") end if %> tanked $6 to $92 1/2 while merger partner Travelers (NSYE: TRV) lost $2 to $39 1/8 as CIBC Oppenheimer lowered what will be the combined company's 1999 earnings estimate to $3.85 from $4.24 a share. Meanwhile, J.P. Morgan <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: JPM)") else Response.Write("(NYSE: JPM)") end if %> dropped $1 13/16 to $86 15/16 as Oppenheimer cut its rating on the company to "hold" from "strong buy." Bankers Trust <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BT)") else Response.Write("(NYSE: BT)") end if %> dipped $9/16 to $67 1/16 after The Wall Street Journal's "Heard on the Street" column reported that it is the only major U.S. financial institution that, to date, expects to report a loss this quarter due to global market chaos. Chase Manhattan <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CMB)") else Response.Write("(NYSE: CMB)") end if %> sank another $3 3/4 to $45 1/2, Morgan Stanley Dean Witter <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MWD)") else Response.Write("(NYSE: MWD)") end if %> slumped $3 3/8 to $50 1/4, NationsBank <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NB)") else Response.Write("(NYSE: NB)") end if %> suffered a $3 1/4 loss to $54, NationsBank merger partner BankAmerica <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BAC)") else Response.Write("(NYSE: BAC)") end if %> tumbled $3 3/4 to $60 5/16, American Express <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AXP)") else Response.Write("(NYSE: AXP)") end if %> slid $3 5/8 to $73 5/8, BankBoston <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BKB)") else Response.Write("(NYSE: BKB)") end if %> shed $1 1/16 to $35 3/16, Donaldson, Lufkin & Jenrette <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DLJ)") else Response.Write("(NYSE: DLJ)") end if %> was down $2 3/8 to $28 1/2, and First Union <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FTU)") else Response.Write("(NYSE: FTU)") end if %> was clipped $2 15/16 to $47 15/16.
QUICK CUTS: Microsoft <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %> dipped $2 5/8 to $96 5/8 after a judge denied its request to limit the scope of evidence in the government's antitrust case... Telecommunications giant WorldCom <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WCOM)") else Response.Write("(Nasdaq: WCOM)") end if %> was disconnected for a $1 5/8 loss to $45 3/4 after its U.K. managing director resigned effective at year end. Soon-to-be-merged partner MCI Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MCIC)") else Response.Write("(Nasdaq: MCIC)") end if %> backed off $1 9/16 to $56 11/16... Dense wavelength division multiplexing (DWDM) systems maker Ciena <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CIEN)") else Response.Write("(Nasdaq: CIEN)") end if %> slid yet another $1 3/16 to $25 while voice and data transport and access systems maker Tellabs <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TLAB)") else Response.Write("(Nasdaq: TLAB)") end if %> lost $1 9/16 more to $40 7/8 in the wake of announcing that they will delay the shareholder votes for their proposed merger from September 9 until sometime in mid-November.
Pfizer <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PFE)") else Response.Write("(NYSE: PFE)") end if %>, maker of the impotence drug Viagra, sank $4 1/2 to $95 3/8 after Morgan Stanley downgraded its rating on the company to "neutral" from "outperform"... Smaller financial corporations also lost ground. FirstPlus Financial <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FP)") else Response.Write("(NYSE: FP)") end if %> was tossed for a $3 1/16 loss to $20, Capital One Financial <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: COF)") else Response.Write("(NYSE: COF)") end if %> dropped $4 7/16 to $86 9/16, Imperial Bancorp (NSYE: IMP) fell $1 5/16 to $19 5/16, PVF Capital Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PVFC)") else Response.Write("(Nasdaq: PVFC)") end if %> dropped $3 to $10, and Cameron Financial <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CMRN)") else Response.Write("(Nasdaq: CMRN)") end if %> slid $1 1/4 to $16... Home-equity lender Delta Financial <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DFC)") else Response.Write("(NYSE: DFC)") end if %> pulled back $1 7/8 to $6 1/4 after Salomon Smith Barney cut its rating on the company to "outperform" from "buy," citing difficult operating conditions in the mortgage industry.
Wireless telecommunications firm Omnipoint Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: OMPT)") else Response.Write("(Nasdaq: OMPT)") end if %> tanked $7/8 to $10 1/4 on news that its CFO, Bradley Sparks, who was instrumental in the company's 1996 initial public offering, has resigned to become executive vice president and CFO of digital network company WAM!NET Inc. Also, CS First Boston lowered its rating on Omnipoint to "hold" from "buy"... Power plant developer AES Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AES)") else Response.Write("(NYSE: AES)") end if %> was dumped for a $2 1/4 loss to $24 1/4 on worries that earnings will be hurt by the economic woes in Asia, the former Soviet Union, and South America, which account for about half of its earnings.
Symantec Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SYMC)") else Response.Write("(Nasdaq: SYMC)") end if %> slid $1 1/8 to $19 1/8 after CyberMedia <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CYBR)") else Response.Write("(Nasdaq: CYBR)") end if %> announced that a U.S. Federal Court has ordered Symantec to stop shipping its Norton Uninstall Deluxe and all suites and bundles containing a copyright-infringing code. But Symantec said it had already created a clean version of the product "with no impact to business"... Client/server and Internet applications developer Cambridge Technology Partners <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CATP)") else Response.Write("(Nasdaq: CATP)") end if %> was cut $7 25/32 to $27 3/8 also on concern of a negative impact on earnings from overseas. Adams, Harkness & Hill downgraded the company's shares to "attractive" from "buy"... KPN NV <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KPN)") else Response.Write("(NYSE: KPN)") end if %> fell $1 1/2 to $36 1/4 as the Netherlands' dominant phone company warned that its operating profit could fall by a third, or about $500 million, because Dutch regulators have forced the company to reduce call rates.
Penske Motorsports <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SPWY)") else Response.Write("(Nasdaq: SPWY)") end if %> skidded $2 1/2 to $19 after the company asked analysts to hold off on raising earnings estimates following an announcement that NASCAR will race next fall at Miami-Dade Homestead Motorsports Complex, which is 45% owned by Penske. Analysts had been estimating that the race would bring in television broadcast rights fees alone in the range of $7 million, plus admissions and concessions and other revenues. J.C. Bradford analyst Breck Wheeler said in a research note today that she had decreased her 1998 earnings estimate to $1.16 per share from $1.24 and the 1999 estimate from $1.48 to $1.35, pending further guidance from the company. International Speedway Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ISCA)") else Response.Write("(Nasdaq: ISCA)") end if %>, which also holds 45% of the Florida race track and an 11% indirect stake in Penske Motorsports itself, lost $1 1/8 to $27 3/8 on the day.
FOOL
ON THE HILL
An Investment Opinion
by
Dale Wettlaufer
On Investing and Speculation
Have you been wondering why over the last couple weeks the Fool has been paying so little attention to the market's decline? Where are the splashy graphics and the huge number of articles on the market being down? Hmm, how to describe our attitude, or my attitude at least, without really angering all of those people that "called" this downturn? And how to satisfy all those that are concerned with the market drop who view statements on not being worried as hopelessly Panglossian and Pollyanna-ish?
First, if one takes the long view of owning publicly traded companies and doesn't indulge in the apocalyptic view of some commentators, the recent decline is understandably worthy of concern but not worthy of a freak-out. For instance, one market commentator that has been popping up on Yahoo! said about ten days ago something to the effect of "yes, now is the time to panic!" Congratulations, you called the big market downturn. For that matter, there are lots of bears around -- Jimmy Rogers being one -- who have been calling for a market downturn for years. Well, we've finally had a year in which stocks have turned down, worse so if you want to look at a smaller-cap index such as the Russell 2000.
What good is this market advice, though, when the market tops out 130% higher than when they first started yelling "Fire!?" and is now trading 105% above where the alarms started sounding? The answer is that it's not any good -- it's worse than no good. The utility of such prognostications about the market is negative because it distracts one's mind from the job of being an investor. Such prognostications also seek to predict the outcomes of a complex adaptive system, which in the short run are chaotic and unpredictable on a regular basis.
What is an investor? A prognosticator of what will happen next with the market overall does not qualify. That's what speculators do. Not that one can't be an investor and a speculator at the same time, but one has to make up one's mind whether one is making a trade or an investment. If I think the Fed will lower rates and then sell the November Fed Funds futures contract, that's a speculation. If I go long a certain company that I see as selling 25% beneath intrinsic value, that can either be a speculation or an investment. But just as one shouldn't change one's mind about whether one is going to hit a draw or a fade at the top of the backswing, one shouldn't change one's mind about whether something is a speculation or an investment in the middle of things.
An investor is someone who commits to being a business owner and searches for the opportunities that offer the best return on capital that he commits to investing. For instance, if the year is 1970 and you buy McDonald's as an investment, it doesn't serve any purpose to sell it if it hits your broker's predetermined rule to sell something after it's gone up 50%. If your tax bracket is 35%, then your after-tax return on what has turned into a speculation is 32 1/2%. And then you have to determine what you're going to do with that cash next. If you have a rule that you don't invest in that company again unless the stock comes down 25%, then you might never see that price ever again. No matter what the intrinsic value of that company is and what the price offered by the market is, if you pay more attention to market prognostications, arbitrary rules of buying and selling, the fast-moving oscillator, the cup-and-handle, and whatever else, your thinking on price and value will be muddied.
Market technicians and commentators will pull out the charts on the indexes and tell you that market timing works. Don't listen. As our friend Randy Befumo pointed out in his acclaimed "Buy and Hold Apocalypse" series, the revisionists are wrong. All too often a market guru will haul out a chart, Ross Perot-like, and appeal to our rational senses with a chart showing that an index did such-and-such over such-and-such a period. For instance, one could haul out a chart showing that the Dow Jones Industrial Average slid from 300 in 1929 to 177 at the beginning of 1949. That's an annual return of negative 2.6% per year. Pretty bad, huh? Whichever prognosticator had predicted that must have felt pretty good in 1949.
The introduction of Security Analysis author, professor, and investor Ben Graham's book The Intelligent Investor points out the fallacy of the index and of that prognosticator's good feelings. Graham writes that $15 invested every month in good common stocks -- with dividends reinvested -- would produce an estate of $8,500 at the end of 20 years. That's an average annual return of 8% over that period, which is below the historical total return of stocks during this century, but is actually very much in-line with the real rate of return on stocks in the 20th century. Esteemed Wharton Professor Jeremy Siegel took this same hypothetical investor ten years further down the line from that. In his excellent Stocks for the Long Run, Siegel picks up where Graham leaves off: "...and after 30 years [his stock portfolio would have accumulated] over $60,000.... [which] represents a fantastic 13 percent return on invested capital, far exceeding the returns earned by conservative investors who switched their money to Treasury bonds or bills at the market peak."
A simple numerical index doesn't show the effects of reinvested regular or special dividends and spin-offs. While the indexes make an adjustment to the cost basis of the individual components, they don't take into account the compounding effects of those dividends going forward. For instance, one might conclude looking at the chart that AT&T hasn't done that well over the last three years. Well, one would have to also consider that during that time the company spun off both Lucent and NCR Corp. Adding those results back to the AT&T results demonstrates the fallacy of the index.
The investor in good common stocks can outperform the index. What is a good common stock, though? Those attributes have been well-outlined in the Intelligent Investor and in other Graham writings. When we on the Fool's News and Analysis team write about things like return on equity and return on invested capital, we are trying to help investors acquire the tools to identify what makes for good common stocks. One can point to the 1970s and say, "Look at the Nifty Fifty." But I can say, "Fine, look at what Wal-Mart did over that time period." But that is in retrospect. What we want to do going forward is to identify the new Wal-Marts, McDonald's, Berkshire Hathaways, Travelers, Cokes, Gaps, Fannie Maes, BANC ONEs, etc. The current mania on calling where the market will go next is a waste of time that could otherwise be devoted to finding those companies, learning about them, and figuring out what you would pay for them.
Unless you need to sell your stocks to fund your retirement, this downturn shouldn't be that big of a deal. Unless you just started investing in the last two years, you're probably ahead of a rational annual return target of 11%. Sure, it's no fun coming down from having accomplished 17% annual return at the peak of the market, but one has to be guided by a compass that has something to do with economic reality. Markets won't grow 20% per year 'til the day you die, especially if you're 30. Certain portfolios might achieve returns like that over a number of decades, but that's a rare accomplishment of the highly skilled investor. Nonetheless, it can be accomplished if one can just ignore the noise of those freaking out around them and concentrate on value and price. Trying to figure out where the market is going is best left to speculators.
Please see the Motley Fool's Conference Calls page for call information and links to synopses.
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Contributing Writers Yi-Hsin Chang (TMF Puck), a Fool Brian Graney (TMF Panic), Fool Two Alex Schay (TMF Nexus6), Fool, too Dale Wettlaufer (TMF Ralegh), Final Fool
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