To look forward, it sometimes helps to look back. Here's what Fool co-founders David and Tom Gardner wrote in the opening issue of Motley Fool Stock Advisor in April 2002:
"In our view, American capitalism is resilient and mostly free, and has created the most powerful economy the world has ever known. So long as we protect and nurture it, its stocks will continue to rise more than they fall."
Months of losses would follow, much like today.
But Tom and David weren't the only ones losing. Stocks performed awfully in 2002 as the nation struggled to recover from the 9/11 terror attacks and pull itself out of recession. Here's a sampling of headlines from the financial pages:
- "Much Hoped-For Stock Market Rally Stalls in January," Jan. 29, 2002, Dallas Morning News
- "Why Wall Street Isn't Flying Higher," May 6, 2002, Christian Science Monitor
- "Effects of 1929 Market Crash Were Not As Broad As Today's," July 28, 2002, Worcester Telegram & Gazette
Almost everyone was depressed. Even Berkshire Hathaway chairman Warren Buffett offered cautious optimism in his 2001 shareholder's letter, released in February 2002:
[Partner] Charlie [Munger] and I believe that American business will do fine over time but think that today's equity prices presage only moderate returns for investors. The market outperformed business for a very long period, and that phenomenon had to end. A market that no more than parallels business progress, however, is likely to leave many investors disappointed, particularly those relatively new to the game. [Emphasis added.]
As the calendar turns ...
Fast-forward to 2003. Buffett and Munger -- shockingly -- had it wrong. Not only would a recovery come quickly but it would be spectacular; the Vanguard 500 Index surged more than 28% that year. And some of the best investors profited handsomely:
- Ken Heebner, whose CGM Focus (CGMFX) fund returned 66.5%. His fund's latest filings show that he's investing in Petrobras (NYSE: PBR ) these days.
- Glenn Fogle, whose American Century Vista (TWCVX) fund was up 42.8%. At his latest report, he was buying shares of Weatherford International (NYSE: WFT ) and Cleveland-Cliffs (NYSE: CLF ) .
- Steve Wymer, whose Fidelity Growth Company (FDGRX) fund surged 41.4%. Today, he's investing in Genentech (NYSE: DNA ) and Philip Morris International (NYSE: PM ) .
Fast-forward another five years. Evidence abounds that, for investors, it's going to get worse before it gets better. A sampling of recent financial headlines:
- "Credit Crisis to Deepen U.S. Recession, Business Economists Say," Oct. 6, 2008, Bloomberg
- "Fears of Global Recession Deepen As Stock Markets Plunge," Oct. 7, 2008, The Los Angeles Times
- "Congress Opens Hearings on Financial Meltdown," Oct. 6, 2008, Associated Press
Once again, depressing. But remember back to 2002; that was the time to be buying stocks, not ignoring them. For David and Tom, many of their early selections have grown into substantial winners. Both LabCorp (NYSE: LH ) and GameStop (NYSE: GME ) -- picked in 2003 and 2004, respectively -- have doubled, for example. Their average pick is beating the S&P 500 by 30 percentage points as of this writing.
When history repeats itself
I know what you're thinking: Big-freaking-deal. What should I do now? David (speaking for both him and Tom) offered an answer in a recent issue of Stock Advisor:
My favorite living preacher, the now-retired Irishman Rev. Maurice Boyd, used to remind anyone who would listen that courage is not the lack of fear. We are all touched by fear: fear of death, fear of failure, fear of what a bear market can wreak upon our retirement portfolios. But courage is forging ahead, taking action, being productive despite the fear that we feel! And so I say to you: Courage, Fools.
Easy to say, tough to do -- especially with the S&P 500 down 30% year to date. But paper losses are just that: paper, unless you choose to sell. Ignore that impulse. The market is offering you the same wealth-creating opportunity it did when Stock Advisor began in 2002.
Care to take advantage? Let us help. David and Tom are offering a 30-day, no-obligation free pass to Stock Advisor right now. You'll have access to all of their stock ideas, including their best buy now.
Your best investing year awaits, Fool. Will you seize it?
This article was originally published on May 8, 2008. It has been updated.
Fool.com contributor Tim Beyers, like The Motley Fool, owned shares of Berkshire Hathaway at the time of publication. GameStop, LabCorp, and Berkshire are Stock Advisor selections. Berkshire is also an Inside Value pick. CGM Focus is a Champion Funds recommendation. Petrobras is an Income Investor pick. The Motley Fool's disclosure policy is timeless.