Today's hot investment almost always turns out to be
Learning to avoid "the trend" is easily the most consistently
difficult task investors face.
It's a lesson most investors don't learn - and one that I
personally struggled with…
Back in the late 1990s, Internet stocks were challenging the
stratosphere. Instead of following the herd, I bought boring,
pedestrian dividend payers like U.S. Tobacco (now part of
Oil-Dri Corp (
, an absorbent-material and cat-litter manufacturer; Tasty Baking
(now part of Flowers Industries); and
Ennis Inc. (NYSE: ENF)
, whose principal business was custom business forms.
At the time, I was an investment analyst and editor at a
company that hosted a group of financial websites. Most of the
websites centered on technology stocks and
. And my website centered on "technology value," a
contradiction in words 15 years ago.
Many of my colleagues traded and invested for their own
account. Nearly all of them were focused on tech and
Internet-related stocks. It was a weekly - at times daily -
occurrence for someone to pipe up on a stock that had appreciated
30%, 40%, and even 50% in just one month.
To be sure, 50% monthly gains weren't the norm. But 100%
annual gains occurred with yawn-inducing frequency.
Yet here I was, personally investing in a group of sturdy,
sluggish, dividend paying stocks. Yes, the dividends were
dependable. But the stocks tended to trade flat or
In that go-go period before the tech-crash, my personal picks
would have struck many of my colleagues as stupid. Which is
exactly why I kept my mouth shut. During my weaker moments, I
actually felt stupid.
Investing in the right stocks almost always feels boring,
stupid or ordinary…
But what I understood - what I kept in mind - was that the
race frequently fails to go to the swift.
A couple years later, in the early 2000s, the intra-office
braggadocio ceased. Many of the same colleagues now rationalized
how they were in it for the "long-term" and how it was only "a
matter of time" before the NASDAQ Composite Index would again
Today we are still waiting for the Nasdaq and many high-flying
technology companies to challenge their all-time highs.
I'm not just referring to second-tier tech companies like
JDS Uniphase (NASDAQ: JDSU
Juniper Networks (NASDAQ: JNPR
Even many blue-chip tech stocks still trade at deep discounts
to all-time highs set more than a decade ago:
trades at a 45% discount,
Cisco Systems (
sells at a 68% discount,
is 71% below its high.
Apple Inc. (AAPL)
are notable exceptions, but they were considered also-rans back
in the late 1990s. These were actually contrarian investments
during the tech boom.
By 2003, my ability to endure my "stupidity" began to pay off.
I sold Tasty Baking for a 50% profit. In 2007, I sold Oil Dri to
book a 150% gain. In 2008,
Altria (NYSE: MO
) acquired U.S. Tobacco for five times my cost basis.
Keep in mind that I was also collecting dividends each year on
these stocks, so my total return was even higher.
BGC Partners (BGCP)
recently rewarded my "stupidity" as well. This is a large
financial and commercial real estate broker that I recommended to
High Yield Wealth
readers in November 2011.
I'll freely admit that BGC has had me feeling stupid at times.
Since 2011, BGC has traded mostly down. At one point, its share
price was down 50% from my initial recommendation.
But I had faith in my analysis, and held firm. I continued to
recommend investors add to positions.
This past April, BGC shares popped 45% on the remarkably
profitable sale of one of its trading platforms. The profit was
remarkable because BGC received more for the platform than the
company's entire market cap.
Today, many investors who followed my lead on BGC find
themselves sitting on 20% - 30% gains and a cost-basis that
produces a double-digit dividend yield.
There are a couple additional recommendations within the
High Yield Wealth
portfolio that I believe offer similar opportunities to realize
exceptional price appreciation and high yield on a lower cost
Of course, the key to exploiting these contrarian investment
opportunities is the ability to endure feelings of "stupidity"
when they arise, and that can be difficult. In my experience, the
committed and patient investor often ends up on top.