In the investing world, we consider a "double" a stock that has increased in value 100%. In child-rearing circles, the term describes ending up with exactly one more child than you expected from a pregnancy. I've been fortunate enough to experience both of these blessed events recently. Herein is a comparison of these two life-changing moments, and how to deal with each.
Can you predict a double?
Child-rearing: The indicators are far from foolproof. For example, twins run down the maternal line, but my wife never told me that twins run in her family. In her defense, it was her grandmother's aunts, so it probably didn't seem particularly relevant to the conversation as we decided to have a second child. Could we have predicted this? Not with any degree of certainty. Still, it might have been nice had she told me it was a possibility.
Investing: David Gardner likes to say that he's confident he has several doubles in his portfolio; he just doesn't know which ones. For his Rule Breakers newsletter service, he looks for companies with criteria that greatly improve the odds of doubles. Such a company should:
- be top dog and first-mover in an important, emerging industry;
- possess sustainable advantage gained through business momentum, patent protection, visionaries, or inept competitors;
- have smart management and good backing; and
- have strong consumer appeal, which will help it attract customers, habituate them, profit from them, and protect its business.
Can a double predict a future double?
Child-rearing: Once you've shown a propensity for twins, the likelihood of a second set of twins increases exponentially. My wife and I will be sleeping not only in separate beds, but probably in separate bedrooms.
Investing: Some doubles are often great candidates to double again, but there is no guarantee. Rule Breakers has seen three doubles in fewer than two years as an investing service:
(AMEX:AX)got a huge boost on news of its merger with the New York Stock Exchange. Technically speaking, it can't merge with the NYSE again, so my guess is that it doesn't have another double in it.
(NASDAQ:ISRG)has seen a more gradual climb in its stock price, and it wasn't particularly pegged to a single event. Some folks question whether it's reaching the limit of its installed base of surgical robots, but international expansion, ancillary products and services, and future domestic sales could keep it flying.
(NASDAQ:VRTX)is up more than 310% since its recommendation in the February 2005 issue of Rule Breakers. It's milked much of the value out of its recent clinical trials, but this is an innovative company, and it could find similar success in drugs still in its pipeline.
Is everything peachy when you get a double?
Child-rearing: Um, no. We felt outnumbered by one child. My wife and I figure that if we can make it through the first two years, we'll be OK -- but that's a substantial "if." I have slept a total of 37 minutes since my twins were born more than a week ago.
Investing: It's nice to have that huge boost to your portfolio, but you also have to realize that a double will keep you up more nights than a contented slow-grower. Such huge growth comes with volatility, plus the need to figure out when it's time to sell. Personally, I'll take these downsides. So, when to sell? For all the flash and excitement of the Rule Breakers style, you might expect David to be in and out of his positions. But he's probably more of a buy-and-hold investor than anyone at The Motley Fool. In fact, he still owns Dell
Can the Rule Breakers newsletter service help you become a doubles expert?
Child-rearing: No, probably not.
Investing: Yes. Click here to take a free monthlong trial and peruse the entire Scorecard, including doubles past and future.
Roger Friedman , managing editor of newsletters and author ofNipple Confusion, Uncoordinated Pooping and Spittle: The Life of a Newborn's Father,really did have twins a little more than a week ago. He owns shares of Vertex Pharmaceuticals and Intuitive Surgical.Dell is a Motley Fool Inside Value and Motley Fool Stock Advisor recommendation.The Motley Fool has a fulldisclosure policy.