Lately, everyone from my best friend to the French woman
who cuts my hair has been asking me what I think they should
do with their money.
And these are the same people who, up until about a month
ago, would have much rather spent 30 minutes talking about
socksthan having to listen to me talk about stocks
for even three.
Now, suddenly, they're willing to give up Patriots season
tickets and Caribbean vacations to get into the market -- and
that shows me that people are finally starting to believe
that buying stocks can build wealth again.
So, what am I telling them?
First off, that I'm no expert, and that there's no
telling exactly if or where this dismal market will finally
bottom out. Second, that anyone who tells them otherwise
should be ignored.
And finally, that although he's lost his title as the
world's richest man, I still believe in Warren Buffett and
the process that made him rich -- buying great companies when
they're selling at good prices.
That's why I recommend that people who don't own any
stocks take the time to check out stalwarts like
American Express (NYSE: AXP) or
McDonald's (NYSE: MCD).
Each has a rock-solid, world-renowned brand, has already
weathered severe recessions, and will be around for
decades.
Even better ...
I'm also a big fan of companies that
pay youto own them, which is why I'm recommending
that these folks look into dividend payers like
Dominion Resources (NYSE: D),
Waste Management (NYSE: WM), and
Vodafone (NYSE: VOD).
I've even gone so far as to introduce them to master
limited partnerships like
Kinder Morgan Energy Partners and
Magellan Midstream Partners , which are
paying out monster dividends and have major tax advantages
over regular dividend payers.
Swinging for the fences
Of course, like me, most of the folks asking for my
advice are on the younger end of the investor spectrum -- and
for better or worse, they all want to know which stocks will
make them rich beyond their wildest dreams.
Again, I start by telling them that I'm no expert. Then I
tell them that I think they should build a solid core
portfolio before venturing on to riskier investments.
Finally, I drop this pearl of wisdom on them: The market's
next big movers are almost certainly small companies that
they've never even heard of.
At first, they usually blow me off, arguing that a tech
giant like
Dell (Nasdaq: DELL) or oil and gas titan like
ConocoPhillips (NYSE: COP) will surely be the
next stock to blast into the stratosphere.
So I explain that while each of these are good companies
-- and potentially good investments -- they would have to
pack on $29 billion and $68 billion in market cap,
respectively, just for their shares to double! Large
companies can provide safer growth, but their size also
places limits on that growth.
Then I pull up a list of the top 10 percentage gainers of
the past 52 weeks ...
Stock
52-Week Gain
Market Cap
HeartWare International
4,493%
$256 million
Vanda Pharmaceuticals
1,215%
$415 million
Diedrich Coffee
905%
$115 million
Kirkland's
497%
$266 million
Comstock Homebuilding
481%
$14 million
Dollar Thrifty Automotive
432%
$485 million
OncoGenex Pharmaceuticals
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