This Stock Has Tremendous Upside

There is no such thing as a low-risk stock.

That's the enduring conclusion of 2008, a year in which ostensibly government-backed companies Fannie Mae and Freddie Mac imploded and "Nifty 50" stocks American Express (NYSE: AXP  ) and General Electric (NYSE: GE  ) each dropped by more than 50%.

Without low-risk stocks, it might seem that retail investors like us are left in the lurch. After all, conventional wisdom -- printed and distributed by just about any mutual fund salesperson or financial advisor -- posits that large-cap stocks carry lower risks than small-cap stocks and that U.S. stocks are "safer" than foreign stocks.

What happens in a world where there are no "low-risk" stocks?

This isn't bad news at all, actually
Let's say that you called yourself "conservative" a few years back when developing an asset-allocation game plan. You would've loaded up on large-cap U.S. stocks such as Citigroup (NYSE: C  ) and Procter & Gamble (NYSE: PG  ) .

Conversely, if you labeled yourself "aggressive," you might have been told about a small cap such as Hansen Natural (Nasdaq: HANS  ) or a foreign company such as China Mobile (NYSE: CHL  ) . Even a self-identified aggressive investor, however, would probably not have been introduced to a small and foreign company such as American Oriental Bioengineering (NYSE: AOB  ) . Too risky, right?!

Not really. Those designations are arbitrary, and though I've constructed the following table by cherry-picking specific stocks, the sector-specific indexes aren't far off:

Company

2008 YTD Return

Citigroup

(76.8%)

Procter & Gamble

(13.1%)

Hansen Natural

(44.8%)

China Mobile

(52.5%)

AOB

(53.8%)

Data from Morningstar.

Point being: Those arbitrary designations of risk haven't been predictive this year. Yes, P&G held up better than its peers in this small sampling, but Citigroup, the other "safe" stock, fared worst of all.

What safe stocks will get you
Yet you pay a cost when you invest in the stocks the establishment considers safe. Namely, lower returns:

Company

5-Year Annualized Return

Citigroup

(29.5%)

P&G

7.5%

Hansen

87.2%

China Mobile

26.6%

AOB

10.6%

Data from Morningstar.

It's true that AOB has been wildly volatile since 2003, while Procter & Gamble has had only one down year (this one) over the same time frame, but AOB's five-year annualized return is superior.

While it's no hard-and-fast rule, this example illustrates that with "safe" stocks, you get limited upside, and in periods of stress, you risk the same unpredictable downside you'd find in small, foreign, or even small and foreign stocks.

You may be thinking there's no chance that P&G will ever drop by 65%, or even 25%, in a year. I wouldn't bet on seeing that happen, either. But the fact remains, a few years ago, that scenario didn't seem at all possible with global banking behemoth Citigroup.

How to proceed
I got to thinking about all of this recently while re-reading The Black Swan, in which Nassim Taleb sets out to show that the bell curve is bunk and that the future is shaped not so much by a succession of high-probability events, but rather by a small number of high-impact, seemingly improbable or impossible phenomena. On a sociopolitical scale, this includes events such as the terrorist attacks of Sept. 11, 2001. On a financial scale, it includes 40% market drops that cause you to realize that there are no low-risk stocks.

Yet just as there are negative black swans in the world such as wars and market drops, there are positive black swans such as the discovery of penicillin or the invention of the computer. When you invest in the stock market, Taleb asserts, it's these positive black swans (and their tremendous upside) that you want exposure to.

So where can you find them?

Here's where you won't find them
You won't find tremendous upside potential amid the same tired U.S. large caps that financial analysts have been writing about and recommending for decades. Rather, you need to look at small stocks (Taleb points to biotech as a promising sector for positive black swans), at foreign stocks, or at small foreign stocks such as American Oriental Bioengineering.

It's these types of companies that have the opportunity to surprise the world and the market, and given the resources waiting to be harnessed in emerging economies such as China and Brazil, their multiyear growth potential is enormous. And because investors are fleeing to "safe" U.S. large caps in these times of turmoil (using those faulty risk assumptions), right now you can gain exposure to the tremendous upside potential of emerging markets -- for cheap.

Take risks on your own terms
Taleb's theories and their implications for portfolio construction are a hot topic for debate, and he makes an important point when it comes to ensuring that you're aware of -- and being properly compensated for -- any risks you take.

If there's anything you learn from 2008, it's that there are no more "low-risk" stocks. All stocks carry risks -- don't let artificial designations of "aggressive" or "conservative" make you think otherwise.

That's not to say you should get out of stocks. Assuming you've put away any money you need to protect in Treasuries or insured interest-bearing accounts, at Motley Fool Global Gains, we think that today's valuations offer a great opportunity to invest in the world's emerging economies.

The risks there are real, but tremendous upside opportunities abound. What's more, our travels to China, Indonesia, and Brazil have brought us face-to-face with a few companies (including AOB) that we believe have the opportunity to grow and reward investors significantly for the next decade or more.

You can see our entire list of recommendations, and read all of our emerging-markets research, by joining Global Gains free for 30 days. Click here for more information.

Tim Hanson owns shares of American Oriental Bioengineering, which is a Motley Fool Hidden Gems recommendation. American Express is an Inside Value pick. The Motley Fool owns shares of American Express and AOB. The Fool's disclosure policy recommends you read The Black Swan in its entirety.


Read/Post Comments (34) | Recommend This Article (228)

Comments from our Foolish Readers

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  • Report this Comment On November 20, 2008, at 2:47 PM, megabuc wrote:

    citibank is gone!!!!!!!!!!! they have less steps left in their Sandy bag than Britney........

  • Report this Comment On November 20, 2008, at 3:47 PM, JRMtwo wrote:

    RE: Why The Stock Market Is Not Working In A Logical Fashion;

    Loss of the Up Tick Rule, Mark-To-Market Valuation of Assets, Naked Shorts

    Sir,

    I have questioned my broker as to why the stock market is not acting in a logical fashion. For example the market is swinging by up to 400 points every day. And some stocks in firms with increasing sales, with increasing earnings, and the officers predicting that the sales and earnings will continue, are going down faster than the total market.

    My broker then explained I was not the only person asking about this. A common explanation is the following:

    1. The 70-year-old “Up-Tick Rule” has been abandoned. This rule slowed the process of selling (Shorting) a stock until a seller loans a stock (Put) on the market.

    2. “Naked Shorting” is allowed where the seller is unable to locate and borrow a stock to sell but is allowed to sell the “Short” anyway. This is not fiscally responsible and is a serious loophole in the trading of stocks and can drive down the price of a stock.

    3. “Mark-to-Market” is the act of assigning a value to a position held in a financial instrument based on the current market price for that instrument or similar instruments. If a stock price is driven down using loopholes in the laws rather than market purchase and sales prices then the Mark-to-Market can drive the stock price far below what it would have been in a free market.

    The following is my take on the issue. I hope you and our other leaders take note and correct this serious problem. Here are my views on the issue:

    The loss of the up-tic-rule was put in to slow the rapid ups and down in the stock market. The rule should never been removed. Also, the mark-to-market has frozen assets so that banks cannot use them as collateral to make loans. Short sales should not be subject to delayed settlement. All short sales should be made only when the stock certificate is "in hand" in advance at the brokerage. There should be no "failures to deliver" permitted. This would limit the number of short sales to genuine shares from margin accounts, putting an immediate stop to "counterfeiting" of shares by naked shorts. It is the brokers, who do not have the shares, but want the commissions from the trades who profit. Naked shorts, in my view, are not the result of free market operations. They are the result of loopholes, deceit and perhaps fraud. It is disingenuous, perhaps deceitful, to say that free markets should be left to their own devices.

    If the ‘mark-to-market’ value of mortgage-backed securities plunge, all of a sudden we evaulue the securities in the ‘equity’ category, rather than the ‘fixed income’ category. As a result, they demand a sharply higher return - much more than the increase in risk would seem to warrant - and that’s partly why we’ve seen such big write downs on Wall Street firms and the 25 largest banks..

    Fund managers make obscene profits using naked shorts and marking-to-market. Wall Street and the government seem to have higher priorities, or else are simply unconcerned.

    The victim’s are the small investor. I hope you can help with this problem.

  • Report this Comment On November 20, 2008, at 5:46 PM, PapaRossi wrote:

    I'm not sure how you guy's call yourselves investment specialist!

    What qualify's you to say a stock has tremendous upside when everything you have bought in the MDP Has had tremendous downside. The MDP has lost $500,000.00 so far this year. I know your going to tell me that its because of the fed's and the financials and a crazy market...But if you go back and look at my posts for the last year, you will see that I have been telling you this all along and I was laughed at and ridiculed for my predictions....Well who's laughing now??? Your down 1/2 a milion and ole' Papa's up $87,000.00.

    Do you need a real professional to run your finances???

    PapaRossi

  • Report this Comment On November 20, 2008, at 10:23 PM, jsssssss wrote:

    One last breath for Citigroup before the ship sinks! Jump while you have the chance.

  • Report this Comment On November 20, 2008, at 10:29 PM, TMFAleph1 wrote:

    Actually, Procter & Gamble lost 27% in 2000, and the year-to-date return fell as low as -50% several times during the course of the year. Those are great memories -- P&G was the first investment I made in which I instinctively understood the thrust of value investing.

    Alex Dumortier (XMFMarathonMan)

  • Report this Comment On November 20, 2008, at 10:46 PM, datwoodd wrote:

    My fellow fools, what is wrong with this picture? We are listening to people who know "history", but what is happening has no history. We are looking at a true global shift. The "rules"; exactly, what are they? Who has seen this before? My thought is be cautious. Of course, it is impossible to "time" the market. But, do your really think all the bad news is out? The projections are based on the way things were. We are dealing with how they will become.

  • Report this Comment On November 21, 2008, at 2:56 AM, ticotitao wrote:

    With the actual crisis people that travel less will telephone more. Should be good for Nokias and telecoms!

  • Report this Comment On November 21, 2008, at 9:44 AM, Mojo218 wrote:

    Please tell the gentleman who thought that if the mark to market price of a mortgage fell below its face value then that mortgage should be put in another folder called Equity, etc.

    Tell you what. If I can't sell that mortgage for what it's "worth" in the Equity folder it won't do me any good to change its title. And if you want to buy some of that really good Equity...I've got some I'll sell you.

  • Report this Comment On November 22, 2008, at 7:17 PM, rmiers1 wrote:

    I have a friend who told me about a strange friend of his fathers. This fellow wore see through white shirts with a undershirt showing through. He had a plastic pocket protector containing more than four ballpoints. Nice guy and fair golfer. The thing that set the guy out of normalcy was he was worth 500+ ml and didn't act like it.

    If you remember the 70's it was the time of Dean Martin, laugh In, and being cool. So this gentleman wasn't interested in the norm but played his cards (good card player) in a much more important game.

    We should all know that his patience, optimism, faith, and uncommon sense should be taught to our young children, not to university level classes.

    My friends dad and this gentleman talk weekly. True friendship is rare indeed.

    He does have some different politics although......lol

    He is doing what he has always done, so not to worry

  • Report this Comment On November 28, 2008, at 12:32 PM, MCCONNOHIE wrote:

    Been there- done that - similar as before -- but this has a difference which will accelerate major losses well into and thru , 2009 .The sheer size of the debt collapse.

    Next chapter is- post holiday- crunch on commercial properties having zooming vacancies as small businesses run out of both cash and customers . That leaves the builders--constr. loan --and mortgage holders with high cost properties - highest tax and maintenance costs in history - and severely curtailed rental income. I wish good luck to all !

  • Report this Comment On November 28, 2008, at 1:34 PM, afamiii wrote:

    There may be no such thing as a low risk stock, but for sure some stocks are lower risk than others.

    Any stock that has a debt to equity ratio of more than 1 is higher risk than one with D to E of less than 0.3 (aka Citi and most banks.)

    Any stock that is selling with an earnings yield a lot lower than that for a quality corporate bond is a lot riskier to buy than one that is selling for much less (aka China Mobile)

    What is happening in this market is two fold. Firstly the 'smart' money is deciding that it is no longer prepared to pay for growth (so for now stocks are being repriced to reflect earnings power value.) Secondly leveraged investment pools are deleveraging (and also loosing their equity via withdrawls) as a result their is much forced selling.

    That is not to say that as it becomes clearer how this recession will play out, and if the direction is towards some of the darker scenaro's, that stocks will not be repriced again to reflect only asset value (with investors not even prepared to pay for normalised earnings)

    These will be interesting times for fools and other value investors. I've already had one email from someone who says he's started picking up net nets for some time to come.

  • Report this Comment On November 28, 2008, at 1:44 PM, bradjensen wrote:

    I don't believe in the "running out of oil" fiction. We already know of vast resources such as oil shale that will become more economically useful as technology improves and government restrictions on extraction decrease.

    And since oil is a mineral, not a fossil fuel, there is a lot more of it where we have not been looking - such as midocean.

    And finally, we can synthesize oil using nuclear energy for the heat source, and make it cheaper than we are gathering it now. Coal plus steam plus a lot of heat (provided by nuclear energy) makes all the oil you could ever want. We have the technology today, all we need is some engineering and the will to do it.

    Nuclear synthetic oil will mean oil at $10 a barrel.

  • Report this Comment On November 28, 2008, at 3:09 PM, DaBerz wrote:

    "This Stock Has Tremendous Upside"

    Did I miss something? What stock? Did TMF actually provide insight into a specific stock with tremendous upside?

    Or....is this just one more step by TMF to enter into the "noise" of the rest of the investment community?

    TMF is losing its identity as a unique entity.

    With all of the subscription services offered, TMF might stand for "Trying to Mimic Fidelity".

  • Report this Comment On November 28, 2008, at 3:34 PM, atreusinc wrote:

    Context is important. As we endure the current turmoil, the context of all our investments is not only the market, but the biosphere. Perhaps this is a good time for all of us to consider why we got into investing in the first place.

    Was it only about money, only about our personal success? Or did we do it for our families? Personally lately I'm thinking less about profit margins and more about the world we're leaving our children.

    As things undergo a radical shift, we should look for opportunities that benefit their children as well as our portfolios, investments that improve habitat and natural systems. Nuclear synthetic oil? Ocean drilling? These may be a 'win' for us as investors but a major loss for the planet and our children.

    The era of pure self-interest as the basis for investment is dead. Nuclear energy and oil are extractive and polluting to a degree that is unconscionable. We all know this. I don't know the downsides of the alternatives yet-- solar, tidal, wind-- but as seasoned investors I'm sure we can put our research abilities into finding the lesser of all evils... and start thinking about more than just our family's wealth or our personal success, but about our heirs and their world, three or four generations from now.

  • Report this Comment On November 28, 2008, at 3:47 PM, javnnf wrote:

    And on the top of all these--

    there are pros who are saying we are in for a long recession and stagnation for many many years-- more like Japan or even worse.

    So better consider other scenarios before hoping that the market will repeat as it has in the past.

  • Report this Comment On November 28, 2008, at 3:59 PM, ROLOLASTARZA wrote:

    IF YOU ARE LOOKING FOR A UNDERVALUED STOCK WTI IS A GREAT BUY. HOLD FOR THREE YEARS AND YOU WILL HAVE A THREE BAGGER.JUST BE PATIENT.

  • Report this Comment On November 28, 2008, at 4:06 PM, hungry4food wrote:

    I do think that the market players are scared to dead of the next tax and spend administrations position , because we really don't have a clear idea about the Tax rates given the current market condistions , and if they will choose to be harsh or give the market a chance to recover before the sock it to us , and this idea of socking it to us right when we start to rebound is whats got all up in the air, I do Believe !!!!!!!

  • Report this Comment On November 28, 2008, at 4:09 PM, hungry4food wrote:

    and we still don't hear the Gov talk about the fact that we need a Food Production expansion plan , check this out , Norman Borlaug says we are out of food in 30 years , worldwide .........

    http://en.wikipedia.org/wiki/Norman_Borlaug

    [edit] The future of global farming and food supply

    The limited potential for land expansion for cultivation—only 17% of cultivable land produces 90% of the world's food crops[34]—worries Borlaug, who, in March 2005, stated that, "we will have to double the world food supply by 2050." With 85% of future growth in food production having to come from lands already in use, he recommends a multidisciplinary research focus to further increase yields, mainly through increased crop immunity to large-scale diseases, such as the rust fungus, which affects all cereals but rice. His dream is to "transfer rice immunity to cereals such as wheat, maize, sorghum and barley, and transfer bread-wheat proteins (gliadin and glutenin) to other cereals, especially rice and maize".[34]

    According to Borlaug, "Africa, the former Soviet republics, and the cerrado are the last frontiers. After they are in use, the world will have no additional sizable blocks of arable land left to put into production, unless you are willing to level whole forests, which you should not do. So, future food-production increases will have to come from higher yields. And though I have no doubt yields will keep going up, whether they can go up enough to feed the population monster is another matter. Unless progress with agricultural yields remains very strong, the next century will experience sheer human misery that, on a numerical scale, will exceed the worst of everything that has come before".[20]

    Besides increasing the worldwide food supply, Borlaug has repeatedly stated that taking steps to decrease the rate of population growth will also be necessary to prevent food shortages. In his Nobel Lecture of 1970, Borlaug stated, "Most people still fail to comprehend the magnitude and menace of the 'Population Monster'...If it continues to increase at the estimated present rate of two percent a year, the world population will reach 6.5 billion by the year 2000. Currently, with each second, or tick of the clock, about 2.2 additional people are added to the world population. The rhythm of increase will accelerate to 2.7, 3.3, and 4.0 for each tick of the clock by 1980, 1990, and 2000, respectively, unless man becomes more realistic and preoccupied about this impending doom. The tick-tock of the clock will continually grow louder and more menacing each decade. Where will it all end?"[21]

  • Report this Comment On November 28, 2008, at 4:35 PM, hunter48 wrote:

    Whining hippie BS is just that. There is plenty of land for food and plenty of brainpower to supply new answers to new questions. You hateful hippies please go spew your negative crap at a greatful dead cover band show.

    As for the investors MF is definately shilling a lot of product. I will continue to look for quality companies with good earnings.

  • Report this Comment On November 28, 2008, at 6:23 PM, GoNuke wrote:

    I agree that the Motley Fool has lost a lot of its credibility. I started investing seriously in 2007 and my portfolio included a lot of MF recommendations. Except for GE the stocks I chose myself have done better. I kick myself for not learning more about the systemic financial risk that was obvious to insiders in 2007. I still feel strongly that MF should have understood this and past its understanding along. Either they didn't know which makes them much worse advisors than they claim or they did know and they are just a bunch of promoters. The fact that the million dollar portfolio implies they didn't know and the proliferation of newsletters implies they are a bunch of promoters.

    It aggravates me to see continued promotion of Chinese stocks given how dodgy that market is. The global gains people seem to have no idea how the world works outside the USA. Add to that the fact that the MF appears to have limited insight into the financial system in the USA I am now charting my own course.

    I suppose I should be grateful to the Fools for making me do my own homework. Now that I do I wonder what I need them for.

    All one's knowledge regarding stock market activity/performance is worthless in the face of a global financial crisis. Naked shorting, to up-tick or not up-tick, mark to market, is hardly relevant in a world of liar loans and banks engaged in 50 times equity leveraging practices. When the system melts down so do the markets. Mark to market just reflects the systemic risk that securities face. We can no longer exist simply as equity investors. We must be econometricians who understand unregulated derivatives and opaque balance sheets of large financial institutions.

    From here on in we will have to be able to dissect the balance sheets of the Royal Bank of Scotland an Citibank and follow adoption of BIS capital adequacy ratios as well as daily activity of derivatives markets and derivative structures and government monetary and fiscal policy each time we set out to evaluate a particular company with respect to its value as an investment.

    We will have to know who is selling credit default swaps, what they are being used for, and how much capital is being set aside by the seller to cover potential losses. We can no longer place much faith in the debt rating agencies and the regulations that rely on these ratings.

    With respect to tax and spend Democrats I would like to point out that Republicans have been borrow and spend charlatans. Republican administrations are the ones that have wracked up most of the post war national debt. The Democrats have been far more responsible than the Republicans. Americans need to pay more tax and the US financial system needs more regulation. If the derivatives market is not regulated soon I may simply boycott US securities.

  • Report this Comment On November 28, 2008, at 7:28 PM, deadaphids wrote:

    Wow. Interesting string of messages. I have two decidedly un-financial comments on THIS string:

    First, on the subject-line of this item, in agreement with DaBerz -- and I say this as a Fool and reader who often finds himself marveling at the clever (but ultimately descriptive and honest) titling and valuable content of these daily items -- THIS one was an unabashedly deceptive lure to a ...what?...a mea culpa? a you-can't-trust-anyone-including-us-but-continue-to-trust-us-we-SWEAR? statement designed only to soothe the doubters and have them hold on? Shame, Foolfolk. The use of a simple set of quotation marks around the title would have indicated it was a sarcastic phrase NOT to be believed rather than the opposite.

    And second, has it impressed anyone else that so many of today's Commentators, whether they be wise or foolish (lower-case) in what they have to say, are such terrible practitioners of the spelling and grammatical arts? Jeez.

    Have a good (better) year, all.

  • Report this Comment On November 28, 2008, at 8:03 PM, Fool wrote:

    How can anyone seriously talk about the MF with any credibility. MDP, MF's star service is down a whopping 55% and only started last November. Anyone can do better with a minimum DD, and now with the bargain discounts in the making lets not swallow MF's hype that they called the shots. When MF geniuses park the bulk of their cash reserves in S&P and have to sell at a 36% loss to raise cash for present opportunities we are not talking about brilliant minds, but a bunch of sorry losers.

  • Report this Comment On November 29, 2008, at 6:17 AM, jmacld wrote:

    I have to express my disappointment with TMF. I have come on board several times over the last four or five years and left, each time turned off by the seeming endless barrage of promotion oriented stock picks. Always, “Buy this uncommon value stock now because it is in a down trend along with the rest of the market.” If you are, an advisor and you advise your paying clientele either to do the wrong thing in the wrong market you are deliberately misleading your flock or you lack the economic wisdom to lead.

    Look, we currently have no bottom in site for the US economy or the market. We may have constructed a “phony economy” based on alternating cycles of borrowing, war, theft, counterfeiting, and inflated valuations. Knowledgeable and honest advisors have been pounding the table about the long economic recession as a necessary remedy to the sickness of an economy no longer based on production since 2004. It is morally unacceptable for a paid advisor to be promoting this stock or that stock in this market. We have been in an obviously down trending environment since the failure of the first lower high in December 2008. At that time, TMF should have reeled in their horns and had their flock thinking about taking profits out of risk. “No one can time the markets?” “We don’t want to try and time the market.” Everyone can time the markets. It is simple: when it is going up buy, when it is going down sell.

    Value investing is great. “Value investing” can be summed up in one principle, “Buy cheap, sell expensive.” TMF seems to ignore the sell half of the principle. “An ethical oasis” Shame on you.

  • Report this Comment On November 29, 2008, at 9:31 AM, carolinacoast wrote:

    Another beginner's article from the Fool packed with sales pitches for services offered. I am continually disappointed by TMF. Shallow articles, poor picks. An example? These guys recommended Whole Foods without regard to factoring in and stressing a downward economic trend as a likely downside to this pick. Obviously they should have touted the Dollar store and WalMart, not some expensive grocery store for the impending lean economic times. It's amazing that these guys get any air time / exposure, but they do and I bought their services. What I got in return, I guess, was a lesson in DD. I don't believe these guys have any overwhelming insight, just a lot of overpriced enthusiasm that may just add a nice cushion to a empassioned pick- good for any day trader who's on board.

    To me, we're all genuises in a bull market (Bull market foresight). The truth manifests itself when other factors enter into any equation and a bear market lingers.

    One more thing- I think we'd all agree that we're looking for articles/advice recommending good picks and solid data to back it up. A feel good story like the one above is a waste of effort and loses my respect for the writer. Hell, I can write this stuff- we all could.

    Did anyone notice the play that FRE and FNM got twice now at the 30 cent (approx.) range? That's cool stuff- I saw both bottoms and fully expected the rise. Now there's something to write about. Good stuff and dangerously fun plays. One more time, please.

  • Report this Comment On November 29, 2008, at 10:07 AM, yaiwolf wrote:

    Speaking of Citi, megabuc & jsssssss need to get some new tea leaves or fortune teller...

  • Report this Comment On November 29, 2008, at 10:34 AM, blablabla102 wrote:

    I realize I am getting older and my vision or eyesight has gotten worse but could some one point out to me the stock this gentleman is talking about. The stock that he says has tremendous upside! I have read his article four times and still fail to see the stock he is referring to! Or do we have to subscribe to another service to get this information?

  • Report this Comment On November 29, 2008, at 11:19 AM, SteveTheInvestor wrote:

    Yup. As I have said before, TMF does not go deep enough into the reality of investing. There is always the assumption that stocks will go higher. Maybe they will.... eventually. But to just allow a stock to sink 50, 60, even 80% while advocating "sticking to your plan" is not a good thing. Recovering from some of these losses will take years, if it happens at all. Maybe it's time to acknowledge that it is ok to decrease exposure to stocks if one sees bad things ahead. True, you may miss out on the "big gains", but you won't lose your life's savings either.

    I've lost a significant chunk of money in the last year. On the plus side though, I would have lost a LOT more had I not finally chosen to ignore the advice dispensed here. And please.... spare me the "it's just a paper loss unless you sell". Reality is your current net worth statement.... period. A stock is worth what it's worth. We can speculate about the future but that has nothing to do with current reality.

    No matter how bad things got, and no matter how obvious it became that things would get worse, I was deluged with "stocks on sale" and "stocks poised to pop". Had I swallowed this malarkey, my portfolio would be a total disaster. Being honest, I have to say that the credibility of TMF is a bit weak right now.

  • Report this Comment On November 29, 2008, at 1:16 PM, Newsails wrote:

    Any body feel the love from these comments? We must be very near the bottom according to the "experts" as despair rules.

    I have used Schwabs' advised investing for the last 2 years as a moderately conservative investor and only some of HG's picks before joining Pro.

    I have taken a big hit in my IRA (at least 25%). Schwab didn't see it coming or at least didn't advise me to raise cash in early Oct at our last qtrly review. I doubt most brokers saw it coming. We all should have had Vector Vest telling us to get out in June.

    Pick yourslf up. Dust yourself off. Learn from your mistakes. TMF is a good resource and a good value. I do remember when some of the screens were free though and maybe they still are. Point is it's not the only resource out there. After all is said and done........ I pulled (and will continue to pull) the trigger on all those good and bad trades.

  • Report this Comment On November 29, 2008, at 9:07 PM, sailor50 wrote:

    And Louie Navellier never saw it coming either. Now he's doing what TMF is...recommending that some old favorites be dumped and replaced with new favorites. And I'm left wondering if the old favorites might re-inflate to a large degree and beat the returns of the suggested new favorites. Ah, what a pickle.

    As to grammar and spelling, well, not everyone is a journalism grad or English teacher. Still...past and passed, and principle and principal...should be understood by most grownups.

  • Report this Comment On November 29, 2008, at 9:32 PM, claimer88 wrote:

    crisis? what crisis?...... rodger hodgson

  • Report this Comment On November 30, 2008, at 12:15 PM, Mudmonkey wrote:

    It's an unfortunate truth that misspellings and poor grammar do significant damage to the credibility of the people who are trying to make what might otherwise be valid points.

    It's also true that TMF is starting to sound like guys trying to sell stuff, rather than guys trying to offer valid investment ideas, market insight, and a forum for discussion. Lately, there is an eerie similarity to those guys with the 800 numbers claiming fabulous (literally) track records, and offering "can't miss" picks for NFL games, (at a fee, of course). I sure hope they right the ship and get back on their original course soon.

  • Report this Comment On November 30, 2008, at 1:46 PM, chrismankins wrote:

    What I can tell from this market is that like any other human endeavor, given enough time, people find loopholes to "game" the system. I'm putting almost all my investing funds into online savings accounts. I may be a simpleton but I do understand one thing very well. When investing is based less on a system of trading value for value, and based more on a system of highly esoteric rules and regulations, it means the looters have taken over. I've lost over 25% of my IRA's and 401(k)'s. The problem seems to me that government doesn't commit to sensible regulation, but only "punts" the problem into the future. So what happens is a market that should have a small correction today will instead be allowed to snowball into a catastrophic correction 5 or 10 years from today. Instead of trying to judge the value of stocks, to make money you have to be good at judging and timing the government's policy. Any system that depends on this kind of phony valuation is corrupt and will destroy this nation's greatness.

  • Report this Comment On December 01, 2008, at 12:18 PM, lupus62 wrote:

    I may be very simple, but I like things very simple. I just decided that Citi, @ $3.67/share, is ridiculously underpriced, so I up and bought a big bunch (big, that is, for me) just about when they agreed to "suspend" their dividend for 3 years. (At that price the dividend came out to about 17%!)

    Nevertheless, it seems to me that a financial intitution of that size and wealth ($3 TRILLION in assets, worldwide) will not go under, even if it sells off big pieces - e.g., the brokerage business.

    I'm glad I didn't buy the stock in August, but if "buy low, sell high" is still a valid parameter, it looks pretty good today.(Citi hit $8 on Friday, is about $7.50 right now.)

  • Report this Comment On December 03, 2008, at 11:06 AM, TestAnalysis wrote:

    I'm always skeptical when someone goes for a trip to China or India and based on their two week trip to the nation start recommending stocks from that nation. It works in a bull market but as soon as the bull run is over we all know what happens and that is what exactly motley fool is.

    If you want to invest in China, ask someone who has lived in China for 20 years and understands the cultural, political and business landscape of China.

    Similarly for India or any developing country never trust someone who returns from a two week trip and starts recommending stocks.

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