Daily Posts Archive

The best way to make big money in growth stocks is to invest in fast-growing companies in fast-growing industries, and ride the major trends for as long as they remain up. In 2007, the biggest trend - still ongoing - was the rise in solar power stocks. And next year? Here are my five best guesses for the trends that will reward investors in 2008.

I have always believed that cutting losses short is, by far, the #1 rule when investing in fast-moving growth stocks. So much so that my stops are often less than 10%, even 5%, as I try to buy a leader near a logical support level.

If I could buy any insurance company, I’d buy Geico. Unfortunately, it’s already owned by Warren Buffett’s Berkshire Hathaway. My second choice? China Life Insurance (LFC). China Life was a government entity until it was sold to the public in December 2003, in the biggest Chinese IPO to date.

Why would you want to invest in a hard disk maker? Because historically, these companies have provided many opportunities to make big money quickly, and it looks like we’re entering one of those periods today.

And if you’re trying to build an entire country, the materials you need might just be prosaic steel and copper, and that brings me to my investment idea for the day. The company is Rio Tinto (RTP), the U.K. mining giant that sells billions of dollars worth of iron ore, copper, aluminum and other minerals every year. The company is growing fast because of demand from China and the rest of the developing world, and that growth is having some unexpected consequences.

Today, one investment strategy that’s struggling a bit is the value strategy. While growth stocks in general have had a great year, and international investments have had a great year, thanks in part to the falling dollar, value investing strategies have lagged.

For almost everything we buy in life, price matters. From gasoline to automobiles, cheeseburgers to chateaubriand, we’ve learned that the lower the price, the better the deal.

My investing idea in this issue is FLIR Systems, a global leader in thermal imaging. The company’s name is an acronym for Forward Looking Infrared, a kind of imaging technology that allows military aircraft and vehicles to see through darkness (and also daytime fog and smoke). Government Systems applications may be FLIR’s calling card, but they’re a small part of the whole story. The company also has a Thermography division that designs and manufactures temperature sensing technologies that can spot overheating machinery, leaks, flaws in buildings and gradients in scientific experiments.

Now, unlike Wellcare Group, Crocs still has an excellent growth business, and we still have high expectations for the company. But we don’t confuse the stock with the company, and we never argue with the stock. CROX, like WCG, is heavily damaged. Every rally from here will be met with selling pressures from investors who bought higher who will now be content to “get out even.” And thus it’s highly unlikely that this stock will return to its winning ways in the near term. So we say sell.

Back on October 13, I penned a CWA titled “Finding Your System” where I wrote about finding a system that fits you. It’s a topic that’s frequently on my mind - money management-type topics are always worth some thought - and I was reminded of it just a few days ago when I was re-reading parts of Reminiscences of a Stock Operator, the fictional biography of Jesse Livermore, and one of the best investment books ever written.