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Friday File: Profiting from Infrastructure and Inflation

Adding to a well-positioned holding, plus more updates from the Real Money Portfolio

By Travis Johnson, Stock Gumshoe, February 11, 2022


Remember the good ol’ days, from, say, 2010 to 2018, when it was really, really unusual for a stock to move by more than 3-4% in a day?

Man, I miss those days.

It used to be that you could skim through a list of stocks, your eyes would be drawn by something that jumped 8%, and that was an indicator of some big news… now, I routinely see some of my holdings go up or down by 10% in a day, without any real news at all.

Thank the Federal Reserve, I guess, and the bubble-like valuations that we’ve grown to enjoy after a couple years of full-tilt and heavily stimulated enthusiasm from individual investors and several years of near-zero interest rates forcing anyone who wants meaningful returns to be more aggressive and speculative. When markets move like that, it’s hard NOT to be short-term focused and have your emotions run hot and cold every day as you see your favorite stocks fluctuate… which probably means that this environment is presenting opportunities for those who can look past short-term momentum, but that doesn’t mean it’s going to be easy.

The time in my memory when it was most difficult to buy stocks was from 2009-2011 or so, even though that was clearly, looking just at the numbers, the best time to buy almost anything. The bruising from a big crash makes you want to drop down in your den and curl up in a ball. Nobody wants to be the first mole to poke his head out of the hole to see if everything’s OK, that guy always gets hammered on the noggin… so, as in all things, we overreact, waiting as stocks drop through reasonable valuations and fall to cheap valuations as we shake our heads and say, “hmmm, no, it’s still too scary, I’ll keep waiting.”

These are the times to be balanced — try to refocus on those strategies and arguments and fundamentals that you were using to buy stocks based on their potential before the COVID mania came along, especially if you got a little too caught up in the enthusiastic trading of the past 18 months… don’t overreact and sell everything, but also don’t overreact and buy everything. The investing world appears to be going through a transition, but it will probably look a lot more dramatic on the worst days than ...

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