<THE DRIP PORTFOLIO>
Consistency and Investing
Discipline over Wisdom
By George Runkle (TMFRunkle)
OKINAWA, JAPAN (May 10, 1999) -- I left the U.S. for Japan on Saturday, May 8, and as I got ready to leave I wrote this Drip Report and next week's Drip Report around midnight Friday. I want to talk a little more about Marriott (NYSE: MAR) and choosing stocks in general. Fool Warren Gump made an excellent post on the Marriott stock board (message #58) last week. Warren points out a number of reasons that Marriott is a good investment even though it doesn't pass the Rule Maker test. This gives me an opportunity to talk more about investment strategies.
It is true that Marriott fails the Rule Maker criteria, as I discussed last week. It also doesn't make the Foolish Four, the Small Cap Growth Stocks, or Rule Breaker test. There are many different ways to pick stocks, and the important thing to follow is consistency. Over time, any sound way of evaluating stocks will work well.
Once I received an e-mail from a person questioning a part of The Motley Fool Investment Workbook. It seems the book disagreed with what he read elsewhere, and he wanted to know why. I told him why we had a different opinion, and he responded to me by saying, "I may as well just use a dartboard." That probably would work, too, as long as his picks were truly random and he had a statistically large enough portfolio to mimic the market's return. That could beat most of the Wise.
How can this be? Maybe part of it is found in the commentary we see on CNBC. At the end of each quarter there is "Window Dressing" where the Wise fill up their managed funds with hot stocks. They also are into "Sector Rotation" and various other methods of trying to find the hottest stocks. None of this sounds consistent to me. On the other hand, there are Fools plodding faithfully along in their different but consistent approaches, and beating the market over the long run.
Sometimes the approach we choose may not work well. Right now, many of the Internet-related stocks have dropped quite a bit. Of course, there are the Wise on TV saying this mode of investing is "finished." Now we are supposed to buy into blue chips, at least the last time I was listening to the television. This guarantees a constant shifting of funds, a pattern that fails to find those elusive high returns. That's not for us. As Drip investors, we, like other Fools, also need to be consistent in our methods of choosing stocks.
There are a number of ways to select stocks for a Drip portfolio. I like the Rule Maker method that Tom Gardner champions. However, you may wish to choose another method. What is important in the long run is not whose method is right, but that both of us stay consistent with a strategy that works. That way we will both win.
Call Your Boss a Fool.