Monday Twofer

Yesterday I read an article at Seeking Alpha where the author revisited his analysis of a large cap industrial stock that he wrote about favorably last October. Since mid October the stock is up 31% versus about 9% for the S&P 500. The stock in question is one I own for clients (the name is not important for this post) and so obviously I am favorably disposed.

The author reasonably notes his having been correct before and lays out why he believes the name still has bright prospects ahead. As noted above the market is up 9% in the last six months which should at the very least should make us wonder about the notion of confusing being smart with a bull market. The history of this stock has been to go up more than the market but also to go down more than the market. While this is at least a little counter factual my hunch is that having been involved with this name for seven or eight years that had the market been down 9% in the last six months that this stock would have been down more.

This does not make the author wrong or make it a bad stock but from the top down, during a bull market (or if you prefer, during this ongoing sucker's rally) most healthy companies go up and this company is healthy. There is plenty of need/demand for this company's stuff and it is very profitable. Generically speaking this type of stock should go up in a rising market and that is generally what this one does.

This is about understanding what type of stock this company has. It is cyclical and typically performs as mentioned above, contrasted maybe with some sort of stock that could be thought of as being in its own world.

Next up is the following comment left on another post I read at Seeking Alpha (not my post);

If I had to guess, you don't actually don't invest at all and you're just ETF holding charlatan like much of the academic community. There is no independent opinion in this article at all.

So aside from the harshness of it I think there are a couple of behavioral issues here to mention. I think there is a fair bit of ego exhibited along the lines of only pure stock pickers are real investors. There are all sorts of reasons why not everyone picks stocks. There are issues of time available, account size, analytical skill, volatility tolerances and so on. While some do look down on the use of funds (exchange traded or otherwise), just as using nothing but ETFs doesn't makes sense (no single wrapper can possibly be the best for all exposures at all times) so too does using only individual stocks for every single exposure in a diversified portfolio not make sense.

As investment products proliferate and evolve some will turn out to be useless or even dangerous but there are also plenty that will be very useful in terms of addressing some of the issues above like time available and so on and to not make use of what is available seems silly to me.

On a slightly more macro note there are countless ways to have success with investing and no one person can be good at all of them. That which is right for you will probably not be right for other people. Investors have success buying on strength while others buy on weakness, ditto selling strength or weakness. There is trading versus investing, momentum versus buy and hold, top down versus bottom up and stock picking versus using funds. Any of it can work and any of it can fail. Figuring out what is best for you is a key building block to long term investing success.

Lastly I need some help unrelated to investing. We are going to Seattle soon for a couple of days for something dog rescue-related (more details to follow) and we want to hit up a couple of the coffee houses up there that are not Starbucks. We know about Stumptown from Portland but would welcome any input, we are staying downtown. We are trying to avoid getting back and someone saying "you went to Seattle and didn't go to....?" Any help would be much appreciated.