After every trading day, The Wall Street Journal publishes a table of stocks and how they fared during the session. The newspaper associates codes with several stocks based on any special events that may have happened that day. One of those codes is boldface, which indicates that the stock was either up or down at least 5% on the day.
Every day I've looked, there have been companies listed in bold. Here are some that recently made the cut:
|
Company |
Closing price 8/30/06 |
Closing price 8/31/06 |
Change |
|---|---|---|---|
|
Royal Caribbean |
$33.82 |
$36.48 |
7.87% |
|
Nordstrom |
$35.28 |
$37.35 |
5.87% |
|
Nissan |
$6.46 |
$6.81 |
5.42% |
|
Guess? |
$43.00 |
$40.80 |
(5.12%) |
|
Red Hat |
$24.50 |
$23.20 |
(5.31%) |
|
Goldcorp |
$30.47 |
$27.66 |
(9.22%) |
|
JDSU |
$2.63 |
$2.27 |
(13.69%) |
This rapid movement suggests a tremendous trading opportunity. Anticipate the large changes, buy the ones that will go up, and short the ones that will go down. Close out your positions once they've made their move, and start all over again with the next round of big movers. Voila!
Even assuming that, after taxes, fees, and the effect of your trades moving the market, all you'd keep was a 3% daily return, the end results would be stupendous. In fact, as this table shows, you'd soon be a trillionaire, even starting from as little as $1,000:
|
Time |
Value |
|---|---|
|
Start |
$1,000.00 |
|
Year 1 |
$1,204,852.63 |
|
Year 2 |
$1,451,669,855.02 |
|
Year 3 |
$1,749,048,239,710.21 |
Reality check
But there are no trillionares. Warren Buffett, largely considered the greatest investor of our era, is "merely" a billionaire. Yet there are still infomercials broadcast every weekend that tout how "ordinary people" make extraordinary returns in a week by rapid-fire trading quick-moving stocks. The fact is, if trading were that easy, we'd all be filthy rich.
Unfortunately, in the short run, the market has a mind of its own. Those infomercial testimonials? They're accompanied by a fine-print disclaimer that says "results not typical." Assuming those phenomenal short-term returns aren't entirely fabricated, they're the one-in-a-million outliers produced by pure random chance. There is simply no way to reliably pick the daily winners and losers.
What you can do successfully, though, is exactly what we do at Motley Fool Inside Value. Our market-beating strategy is based on the same value-focused philosophy that made Buffett rich in the real world. We simply find companies trading for less than they're worth, buy them, and wait for the market to realize its mistakes.
Sometimes it can take the market a bit of time to come to its senses, but our brand of value investing has beaten -- and continues to beat -- the market for real-world investors. Join us today to see how it's done. Still skeptical? A 30-day free trial starts here.
At the time of publication, Fool contributor and Inside Value team member Chuck Saletta had no ownership stake in any of the companies mentioned in this article. The Fool has a disclosure policy.
