It's different this time.
We've heard that before, right? And inevitably it seems that things turn out to not be different this time -- or any time.
When the Internet bubble burst at the turn of the century, stocks like Sun Microsystems and Cisco Systems
Boo to the bulls
But it's not just the overly exuberant bulls that get carried away and think things will be so different. When troubles hit the market, bears tend to come out of hibernation in spades saying that this time -- this time -- the stresses are finally going to be too much for the system and the sky is finally going to fall.
In other words -- that's right -- it's going to be different this time.
When the bull chorus gets loud, we know it's a good idea to tread carefully. But what about when the bears have the dominant voice? Well, I'd say that these stocks tell a pretty good story:
|
Company |
Price Change Since October 2002 |
|---|---|
|
Research In Motion |
7,412% |
|
Apple |
2,654% |
|
American
Tower |
2,519% |
|
Priceline.com |
1,177% |
|
NVIDIA |
1,057% |
In other words, tech stocks turned out to be some pretty good buys during the depths of pessimism in 2002.
Lost in the data mine
But I'm not here to mine historical data and convince you that 1,000%-plus returns are at your fingertips. Picking out the stocks above from the bloody tech battlefield five years ago would've been very tough (I didn't buy them!). And buying tech in 2002 didn't guarantee that you weren't stepping on a land mine.
What this does show, though, is that post-bubble the world didn't come to an end -- even for tech stocks.
Back to the basics
So, if it's not different at the top and it's not different at the bottom, then where does that leave us? Right back at good ol' Benjamin Graham.
In his classic text, Security Analysis, Graham defined investing as putting capital toward something that "upon thorough analysis, promises safety of principal and a satisfactory return." It's when the cries of "it's different this time" get loud that it's most important to remember this definition and get back to the basics.
Fool co-founder Tom Gardner and our team at Motley Fool Hidden Gems have found that looking for companies that (1) have high insider ownership, (2) are straightforward with shareholder communication, (3) aren't overrun with debt, and (4) are reasonably valued is a good way to find home run stocks ... regardless of whether the market is flying high or plunging to new lows.
It's not different this time
There are a lot of economic threats right now -- slumping housing prices, a sickly credit market, and instability in the Middle East. A look back over the history of the stock market, however, reveals a resilient U.S. and global economy that has bounced back from two world wars, a crippling depression, and the Cold War -- among many other things.
While there will be some turmoil in the near term (and you could say that at the beginning of each and every year), chances are the problems that we face now are going to be digested and the global economy will continue to move forward. That's why we encourage our members to stay focused on the long term at Hidden Gems. Our small-cap recommendations can get rattled hard during times like these, but history proves that they offer the best multidecade performance to investors.
To see the stocks we're recommending today, click here to join Hidden Gems free for 30 days. Our picks are ahead of the market by 24 percentage points on average, and we believe it won't be any different going forward.
Fool contributor Matt Koppenheffer does not own shares of any of the companies mentioned. Priceline and NVIDIA are Motley Fool Stock Advisor recommendations. The Fool's disclosure policy has never once been caught with its pants down. Of course, it doesn't actually wear pants.
