February 1, 2013 Comments

So, we got a surprise 150 point, 1.2% jump in the DOW today. Which goes to show that in investing half the battle (actually 100% on average) is just showing up. The market tends to rise over the years. A buy and hold index investor can get the average return just by showing up and staying put. These are the passive investors. All other investors try to beat the index by stock selection and various forms of timing strategies. The passive investor grabs every 150 point day just by showing up, but also gets the down days but does make the average return over time, which works out okay. The markets timers try to side-step the down days but more often than not also miss too many of the big up days.

This web site is dedicated to beating the market by superior stock selection. In order for some people to do that others must trail the market. (That is harsh but it is the math of the matter.) Luckily there is a large pool of people who can be expected to trail the market because they follow non-sensical methods and jump in and out of the market at the worse times.

When you think about it, value based investors ended up experiencing more of a “financial opportunity” than a financial crisis. It felt ugly a the time but the financial crisis allowed the smart money to scoop up stocks at very attractive prices from the panicked dumb money. (Again, harsh but true). Or perhaps more kindly it allowed those willing and able to take risks at the bottom of the market to scoop up bargain stocks from those who would not or could not bear the risk.

Most of our stock picks gained today. About the only notable loser was Toll Brothers down 3.1%. I have said that Toll Brothers does not look like any real bargain to me. Still, in it could do okay with the recovery in house prices. And I do hold some Toll Brothers.