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 a couple
months 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, I'm saying that I'm no expert, and that
there's no telling if the market can continue along this
trajectory without a serious pullback. Second, I'm adding
that anyone who tells them otherwise should be ignored.
And finally, I'm saying 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
Procter & Gamble (NYSE: PG)
and AT&T (NYSE: T).
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
Caterpillar (NYSE: CAT),
Altria (NYSE: MO), and
PepsiCo (NYSE: PEP).
I've even gone so far as to introduce them to master
limited partnerships like
Kinder Morgan Energy Partners (NYSE: KMP) 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 some tech
giant like
Google (Nasdaq: GOOG) or an oil and gas titan
like
ExxonMobil surely will 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 roughly $180 billion and $345 billion in market cap,
respectively, just for their shares to double!
Granted, large companies can provide safer growth, but
their size also places limits on that growth.
Next, I pull up a list of the top 10 percentage gainers of
the past 52 weeks ...
Stock
52-Week Gain
Market Cap
HeartWare International
8,814%
$330 million
Diedrich Coffee
4,300%
$151 million
Radio One
2,545%
$124 million
Vasogen
1,120%
$64 million
Vanda Pharmaceuticals
1,114%
$282 million
Dollar Thrifty Automotive
1,111%
$444 million
Air Transport Services Group
Continued... |