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 of you Warren fans out there (and the Fool, while a big fan of Mr. 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, despite the recent weakness. 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 way from the frothy peak?
Greedy, because gold is priced too high, which leads some to suspect that the dollar is going to come crashing down? Fearful because the state of the recovery is in confusion because earnings at MGM Mirage
Health care is hated, so I should be greedy and pick up shares of Medtronic
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 of Intuitive Surgical betting that people still needed prostate surgery and hospitals would continue to use this company's robotic surgeons. And, hey! People continued to get prostate surgery using this company's robotic surgeons. Procedures climbed, along with my stock.
And those who expected banks to come through the turmoil more or less intact, like AIG or USB, have been handsomely rewarded. But what should we be doing today?
Inhale, 1, 2, 3, exhale, 1, 2, 3
Professor 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 out 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 $1,100 or more. In the summer of 2008, 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. 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 Yum! Brands
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 those companies that have a strong competitive advantage that can be held for years.
Companies such as Marvel Entertainment. He first advised subscribers to buy this company over seven years ago, and then proceeded to hold on, actually recommending it three more times. After Disney finished its purchase, the four positions in Marvel had become winners for Stock Advisor subscribers to the tune of 1,457%, 869%, 287%, and 85%.
To find out what company he's latched onto this month, and to grab his and his brother's latest picks (out today), 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 Intuitive Surgical, Yum! Brands, and Chesapeake Energy, but no others mentioned above. Chesapeake Energy and Disney are Inside Value picks. Intuitive Surgical is a Rule Breakers recommendation. Disney is a Stock Advisor selection. The Fool owns shares of and has written puts on Medtronic and it owns shares of Chesapeake Energy, as well. Google is a Rule Breakers pick. The Fool's disclosure policy is neither fearful nor greedy, but it's also not as famous as Warren Buffett ... yet.