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.Once the stock began running like a locomotive, that oldccc_payne_171-198_ch07.qxd 3/13/07 8:00 AM Page 192192 TOOLS AND RULESFIGURE 7.15 Infospace, March 2003 to November 2004Chart courtesy of Prophet Financial Systems (www.prophet.net).emotional feeling among investors that they couldn t lose cameback, too.Just a couple of years removed from being totally writ-ten off (the stock had trolled around at $3 a share in late 2002), thestock was back and so, too, was a feeling of invincibility.And then it happened: The company began disappointing in-vestors on a regular basis.But most investors stayed the course,and there were always folks willing to buy the weakness.There were major free falls in November 2004, January 2005,February 2005, April 2005, and July 2005.(See Figure 7.16.) Still,the allure of story was powerful, and the story was fantastic; Ieven had a buy on the stock thinking it was going to score big withits ring tones.The cautionary tale from the fundamental perspec-FIGURE 7.16 Infospace, September 2004 to September 2006Chart courtesy of Prophet Financial Systems (www.prophet.net).ccc_payne_171-198_ch07.qxd 3/13/07 8:00 AM Page 193Chasing Stocks 193tive is that potential is nothing if there isn t the skill to make itcome true.The company wasn t dreaming of conquering theworld; it really was positioned to take advantage of one of thehottest consumer trends in the world.It just didn t happen.I gave up on the stock in the summer of 2005, but it found terrafirma later that year and begin to climb back, albeit with lessoomph than before, but obviously there were folks buying the dip.But history repeated itself; the stock began falling in May 2006 andwas totally annihilated.On September 21, 2006, the company re-ported it had lost Cingular, as the telephone giant was going topursue ring tone deals directly with record companies.When to Buy the Instant DipUnnerving news that doesn t change the fundamentals and proba-bly will not have an impact on earnings but sends a stock spiralinglower anyway creates great buying opportunities.On August 10, 2006, security forces in England busted a plot toblow up 10 airplanes heading to the United States.The plot in-cluded an assortment of airlines, and all airline stocks were downin trading that day, but the shares of British Airways (stock symbolBAB) seem to take the biggest hit.The stock, which was trading atan all-time high, was slammed from $75 a share to $69 in two days.It was an unnerving period, to be sure.Security measures at air-ports were ratcheted higher just as people had finally become usedto the extra scrutiny, and now boarding a plane would be an eventougher ordeal.I flew to Dubai a month after the incident andwatched firsthand just how complicated and even comical gettingthrough security had become.While I was waiting in line to bescanned, there was a security guy pulling things out of bags andyelling to the long line of travelers reminders about items thatwere prohibited.These were the items he was actually pullingfrom baggage and showing to the crowd: No juice. No water. No glue. No applesauce.Obviously there were serious concerns about flying and whetherthe public would pull back on late summer plans, or whether thereccc_payne_171-198_ch07.qxd 3/13/07 8:00 AM Page 194194 TOOLS AND RULESFIGURE 7.17 British AirwaysChart courtesy of Prophet Financial Systems (www.prophet.net).were plotters who hadn t been found and were still prepared togo ahead with their mission, or whether there simply were otherundiscovered plots.There were reasons to rationalize that this lat-est would-be terror plot to use airplanes as weapons of destructionand fear could hurt demand for air travel.But that would havebeen a poor assumption.Instead, the share price of British Airways stabilized and re-bounded for a 20 percent move in a few weeks.(See Figure 7.17.)Chasing Stocks over the Long TermYou are going to be in the stock market for the rest of your life, andstocks will go up and down.But you will not become rich byguessing that a stock isn t going to move higher because it s al-ready made a good move.Great businesses grow over years,decades, in fact.What may look like the ninth inning to you is re-ally just the second inning.When the stock market came unglued in 2001, virtually everysingle publicly traded company saw its shares hammered, includ-ing brick-and-mortar businesses (i.e., businesses that you can actu-ally touch and feel for all the talk about Enron, how many timesdid anyone walk or drive into an Enron gas station?), businessesthat figured to be around until the end of time.Case in point: Yum!Brands, the company that owns Kentucky Fried Chicken, PizzaHut, and Taco Bell, to name just a few.ccc_payne_171-198_ch07.qxd 3/13/07 8:00 AM Page 195Chasing Stocks 195There are hundreds of businesses that we know will be arounduntil the end of time, in part because we spend a lot of our moneythere.Sometimes investors consider this fact and think about buy-ing the stock, only to talk themselves out of it because the stock is too expensive. Still, these same people make that weekly, maybeeven daily, visit and spend their money at these establishments.Itsimply makes sense to be a part owner of these establishments ifyou are willing to part with your hard-earned cash there.When it comes to any investment, the thing you want to focuson is future value and not how much the value has alreadychanged.Interestingly, people have come to grips with this con-cept when it comes to real estate.People always think their homeis going to increase in value.Yet so many investors believe theymissed the move, that a stock has already moved higher andtherefore they re late to the party.That is a short-term mentalitythat makes the stock market the casino so many individual in-vestors say they fear in the first place.The fact of the matter is that you are going to build a portfolio ofstocks and buy over time.Your goal is to own individual stocksthat are going to trend higher and higher over time.There will bebumps in the road, but don t talk yourself out of prosperity bylooking behind.Instead, look ahead [ Pobierz całość w formacie PDF ]