There's no such thing as a lucky investor. "Luck" applies to speculators, roulette players, and Charlize Theron's boyfriend. An investor prepares and, when his preparation meets with opportunity, he becomes what others call "lucky."
Now is an excellent time for preparation. The market had a huge run in 2003 and, despite the recent pullback, opportunity for value investments is scarce. Instead of scouring a difficult market for places to put your money, why not keep your powder dry and research the great companies you wish you owned but can't justify at the current price? In other words, prepare a "wish list" of stocks and determine the price at which you would buy them.
Here are a few on my list:
I also want to own Home Depot
I almost left Wal-Mart
But I just can't resist. I want Wal-Mart in my portfolio. It's a well-oiled machine that's delivered outsized returns to investors for several decades. You're talking about the biggest and best retail company in the world, and it hasn't even broken the seal on China yet. Give it to me at the low, low price of $46 a share.
Diet fads come and go, but Whole Foods Market
Whole Foods is executing better than ever -- finding ways to increase comparable-store sales while ramping productivity at newly opened stores. Also, while other supermarkets deal with labor issues, it conducts an ongoing love affair with its employees.
Earnings have grown for this crunchy Birken stock at a 17% rate over the last five years. It'll do slightly better than that for the next two. Unfortunately, it's way out of any sane person's price range at $76 a share. If it ever drops under $50, I'll make an organic feast of it.
OK, I already own a little Amazon.com
The stock's been hit lately because Amazon says it will pass some of its margin power on to consumers. To me, that's not a strategy investors should punish -- it's a nice move to combat cellar-dwelling, would-be competitors and grow market share in various product lines. Besides, it's easily reversible if and when the company deems it advisable. I like a company with that kind of control of its numbers.
Barron's challenged Amazon's valuation in a March 22 article, and rightfully so. But while its economic analysis was sound, Barron's failed to mention the stock's upside potential as, for example, Amazon spreads its wings overseas. Bottom line: It's a great and growing company -- count me (again) in at $26 a share.
I'm a decade late and a few thousand short on FedEx
FedEx is one of the great stories in American capitalism (in fact, all of these stocks are). Fred Smith conceived the company in a student essay that (1) posited that profitable overnight shipping was possible, and (2) proved conclusively, via the poor grade the essay received, that academia is irretrievably detached from reality.
FedEx's motto is "The World On Time." It should be the "The World Online" -- as access to the world's goods moves online more and more, we need someone to deliver them and, like the ad says, "You gotta use FedEx." OK, so there's United Parcel Service
If the stock ever falls to $57, my long national nightmare will be over -- I'll finally be a FedEx shareholder.
All these stocks are pretty straightforward, well-known stories. That's what I like about them. They are businesses I personally frequent and understand. If I can get into proven companies whose stories I understand and do so at a comfortable price, why bother shopping in the riskier neighborhoods of the stock market?
I know, I know. You don't believe prices will ever get to my wish-list levels. But no one can predict the market's future and, besides, within the last 12 to 24 months, they all traded below my target levels, most of them by a large margin. Had I been ready then with my wish list, I'd be writing this from my yacht in Barbados rather than from my refrigerator-like (in temperature and style) basement office.
Next time, if there is a next time, I'll be prepared to capitalize on the opportunity of great stocks trading below their true value. It may just make me a "lucky" investor.
Tom Gardner keeps a running watch list of Hidden Gems in his small-cap newsletter. Find out what companies he thinks are poised for big returns with a free trial.
Fool contributor Ted Rogers is a writer from Virginia. He owns shares of Amazon. You can send him wild applause, Bronx cheers, and non-virus-infected emails. The Motley Fool is investors writing for investors.