My dad is an investing genius. Or at least he has the sense of an investing genius. And when he gave me some great investing advice, well, I was too young and stupid to know how to use it. I mean literally too young and too stupid.

Deaf ears
You see, I was about 7 when I heard this great advice. My dad's company held its annual party and invited the kids of all employees out for a contest. The organizers had hidden coins in a huge mound of sand and told the kids that they could keep any coins they found.

The special prize was a series of red pennies, which could be redeemed for $5 bills -- big money for a boy in the early '80s. Could it get any better for a 7-year-old than digging for buried treasure?

When the judges started the contest, kids piled onto the sand and dug like prospectors. I was furiously following whichever boy was next to me. He'd dig a hole, give up, and move on to start a new hole. I'd foolishly search the hole he'd just dug and try to find the lucky red penny.

From the sidelines my dad kept advising me to start my own hole and not simply search the abandoned "mines." But I kept looking where every other boy had already dug. Surprising only to my 7-year-old self, my strategy ensured that I never found any coins at all.

Lessons learned
Superinvestor Warren Buffett has stressed that the most important thing for investors to understand is their temperament. Well, I learned two big lessons from my afternoon on the sand hill:

  • Don't expect to find riches where everyone else is looking.
  • Heed the sensible advice of experts who can help you develop strategies for prospering.

Those lessons have stood me in good stead in my life as an investor. When everyone was selling in January, February, and March, I was buying, picking up shares of companies such as America Movil (NYSE:AMX) and Brookfield Asset Management (NYSE:BAM). These businesses have good long-term prospects and solid managements, and experts across The Motley Fool thought they were great buys at depressed prices. It seemed as though nobody wanted to own these awesome companies, and I scored some great gains.

But I was also able to buy during the panic because sensible experts at the Fool helped me see that there was real value out there in the stock market and showed me where to find it.

During and after that panic, I have been watching a slew of companies whose stocks performed phenomenally. So have many other investors; in fact, these five companies accounted for 30% of all the trading volume in August:


Trailing-12-Month Earnings

Price-to-Earnings Ratio

Return From Low

Citigroup (NYSE:C)

($11.3 billion)



Bank of America

$4.7 billion



Fannie Mae

($92 billion)



Freddie Mac

($58 billion)




($89 billion)



Data from Capital IQ, a division of Standard & Poor's. NA = not applicable.

Those are impressive stock returns, to be sure, but they're not the lucky red penny I'm looking for. These companies have demonstrated poor operational performance. Bank of America was the only one of the five to earn a profit over the past 12 months, and that was only due to asset sales and blown-out credit spreads. When the market declined, those stocks were sold down to egregiously low levels because the market had no confidence that these poor businesses would come back. But now investors have bid up their shares and trade them heavily.

Instead, I'm looking for the businesses that have every chance of success even though the market has knocked them down. These companies are going to thrive in any type of economic climate and have shown healthy profits over the past year.


Trailing-12-Month Earnings

Price-to-Earnings Ratio

Return From Low


$98 million




$663 million



Procter & Gamble (NYSE:PG)

$13 billion



American Express (NYSE:AXP)

$2 billion



Data from Capital IQ and, as of Oct. 25.

Sure, these stocks haven't put up the gaudy returns that AIG temporarily did, but it's because these companies are less speculative; they're built to last, and, I believe, will provide better returns. They are the kinds of stocks that Motley Fool Million Dollar Portfolio is recommending. By selecting great companies that are out of favor with investors, our expert advisors allow you to control your temperament and make profitable investment decisions. It's like having an investing expert who gives you a friendly nudge.

Using all the Fool's research across each of its newsletters, the advisors let you know which stock is the best to buy and when. Plus, to align everyone's interests, these experts put The Motley Fool's own money to work in the same recommendations that they provide to subscribers, but they give you an opportunity to buy their recommendations before they do.

To find out more about how you can put the Fool's experts to work for you, simply enter your email address in the box below to snag an all-access pass to Motley Fool Million Dollar Portfolio.

Fool contributor Jim Royal owns shares in Procter & Gamble, Bank of America, and Brookfield Asset Management. Amazon and Netflix are Stock Advisor picks. American Express is an Inside Value recommendation. Procter & Gamble is an Income Investor selection. America Movil and Brookfield Asset Management are Global Gains selections. The Fool owns shares of Procter & Gamble and Buffalo Wild Wings and has a disclosure policy.