Growing Rich - Arabictrader.com

GROWING RICH WITH GROWTH STOCKS
using the concentric circle (or bull’s-eye) method is a great way of
compiling one.
SHED POUNDS, MAKE A PROFIT
Sometimes good investment ideas are staring you in the face, even
though you don’t immediately realize it. Perhaps you have been trying
to get in shape and lose weight. You probably didn’t know this laudable
effort can not only trim your waistline, but also fatten up the
profits of many corporations in the physical fitness business. “This is
a theme I picked up on some time ago,” Stovall notes. Nevertheless,
part of your job as an investor is to decide whether your bull’s-eye
observation is a long- or a short-term trend. “For instance, there has
recently been a resurgence in the use of cigars and cocktails,” Stovall
observes. “I haven’t invested in this trend, because I think it is transient
and won’t last long.”
This doesn’t mean investors can’t profit from a short-term trend.
You can, if you’re quick to spot it and react accordingly. Since you
never know how long a short-term trend will last, however, you must
always stand ready to pull the trigger, to avoid getting creamed once
your temporary bull’s-eye gets clobbered. Therefore, the pursuit of
such quick gains doesn’t much interest Stovall. He’d rather concentrate
on enduring themes that can remain intact for months or even years
to come.
So would Shelby Davis. “Since I am a long-term investor who
stresses ‘research, research, and more research,’ I look for secular investment
themes that will drive a decade, not five weeks or five years,”
he says. “My research wouldn’t do me much good if I owned stocks
for only five weeks. The market is a discounter that’s paid to look
ahead - it’s a barometer, not a thermometer. If you take a longer time
frame, that creates opportunity.”
Short-term trends also make it much more difficult to spot which
specific companies are destined to benefit from them. If, as in Stovall’s
example, cigars remain popular for only a short time, it’s hard to tell
which cigar makers will get the brunt of the business before this craze
is extinguished. If the fascination with puffing on rolled leaves continues
for some years, however, many companies will have a chance
to capture a piece of the action by creating a continuous stream of
new and improved cigars.
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