Assume the market is correct. Cast aside your visions of imminent disaster and imagine the U.S. economy growing at a 4% clip, with a sharp decrease in unemployment. Let your mind wander free to believe the European “debt crisis” is nothing more than a dog and pony show, which will be dealt with and satisfied. Let’s assume Asia and Latin America stay on its current course, without any hiccups. If all of these conditions are met, where do you think stocks are going?
Answer: much, much higher.
I know, it’s annoying to suggest stocks can trade much higher, especially following such a big two year run. But then again, look at the shares of CRM or NFLX. I thought those stocks made big runs 50% ago. If I am to base my investment decisions on the numbers in front of my face, 2012 S&P EPS of $110, then I need to get prepared.
How does one get prepared?
Well, for me, it’s utilizing The PPT to isolate stocks, by industry, with high growth, high ROE, solid fundies (debt/eq., gross margins etc, and relatively low FPE’s). I call this list Growth At a Reasonable Price (GARP). I am casting a wide net that will include 100+ names, so that I may cross reference this list with my momentum indicators. Building this reservoir of high quality stocks will keep my investments isolated to the very best names and help me avoid getting stuck in egregious murderholes. It’s like being able to choose from the best whorehouse in the world, as opposed to some disgusting rats nest in DC.
Naturally, I will set aside a certain amount of coin to buy/sell lower quality scorchers. But, my focus is now switching from trading on a whim, to something more with purpose.
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