My day job is editing and stock analysis here at The Motley Fool. And while doing my daily work, I see enough Warren Buffett quotes and praise to satisfy anyone. I'm sure you do, too. The one quote we both probably see the most is this one: "Be fearful when others are greedy, and greedy when others are fearful."
Well, today, I have a request for all you Warren fans out there (and the Fool, while a big fan of Buffett and his quotations, is hardly the only one indulging itself): Can we just stop with that one for a while?
Which should I be? Fearful or greedy?
Right now, the market is up some 64% from its March low. But that is still 29% below its 2007 high. So tell me. Is now the time to be fearful because stocks are still overvalued and the rally won't last? Or is it time to be greedy because things are still a long ways from the frothy peak?
Should we be greedy because gold is priced too high, which leads some to suspect that the dollar will come crashing down? Fearful because earnings at banks like Bank of America
I'm so confused ... aren't you?
Let's review the tape
Last winter, sure, the world was ending and everyone was as fearful as any Buffett worshiper could hope for. For those who believed that it wouldn't turn out as bad as predicted, and so far it really hasn't, stock prices were very tempting. For instance, I bought shares in Intuitive Surgical
And those who, in March, expected banks like JPMorgan Chase
Inhale, 1, 2, 3, exhale, 1, 2, 3
Professor Jeremy Siegel, of the Wharton School of Business, has long argued that stocks are the place for money if we want that money to grow faster than any other asset class, including precious metals, cash, or bonds. Yes, there are times when one or the other will beat stocks. But picking those times is difficult at best.
Besides, I don't trust my timing ability to "get into" gold when it's at $700 an ounce and "out" when it reaches $1,000 or more. Two summers ago, I shorted on paper most of the legacy airlines -- you know, UAL, Delta, US Airways, those guys -- just in time to watch their prices soar as the price of oil started to come down in the summer of 2008. Thankfully, I didn't do that in real life, because I would have gotten crushed.
So rather than trying -- and failing -- to ride the trend of the day, responding to perceived greed and fear, why don't we keep on doing what has worked so well? Look for companies that have a strong competitive advantage, such as Coca-Cola or Philip Morris International
Then, cap it with a long-term view, letting your winners run and pull your portfolio along with them. Altria, the American cigarette maker, made those who bought and held on for years, very rich.
That's what David Gardner, co-advisor at Motley Fool Stock Advisor and Fool co-founder, does. He ignores the Oracle of Omaha's overhyped pearl of wisdom about fear and greed. But like Buffett, he's always looking for companies that have a strong competitive advantage they can mantain for years. Companies such as Marvel Entertainment. David first advised subscribers to buy this company more than seven years ago, and then proceeded to hold on, actually recommending it three more times. After Disney
To find out what company he's latched onto this month, along with his five Best Buy Now stocks, sign up for a free 30-day trial. There's no obligation.
This article was originally published Oct. 13, 2009. It has been updated.
Jim Mueller spends too much time on the Stock Advisor discussion boards, where he loves to discuss investing and individual stocks. He owns shares of Coke and Intuitive Surgical, but no others mentioned above. Intuitive Surgical is a Rule Breakers recommendation. Walt Disney and Marvel Entertainment are Stock Advisor selections. Walt Disney and Coca-Cola are Inside Value selections. Coca-Cola is an Income Investor selection. Philip Morris International is a Global Gains pick. The Fool's disclosure policy is neither fearful nor greedy, but it's also not as famous as Warren Buffett ... yet.