Don't Sweat the Catcalls

 | Jan 14, 2014 | 11:05 AM EST  | Comments
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What do you do if you like 'em long term? What happens if you decide not to trade, but to invest?

I will tell you what happens. If the stocks go up and up and up while you like them and then you don't call the top and the stocks slip back, you are viewed as a bum. It doesn't matter if you have been right for ages, the simple fact that you didn't say goodbye makes you liable for catcalling.

Ah, but here's the rub. If you decide that you don't like them after the run, two things happen:

  1. Everyone who bought them on the way up, particularly the last in, hates you.
  2. If the stocks come back, you will never be able to get back on them.

So, you have to ask, "why bother?"

That's how I feel right now with the oil and gas plays. They are without a doubt going down hideously. They lose points every day, even as we know that the breakdown in oil, the commodity, hasn't occurred. They get crushed even as we know there's plenty of demand, it just happens to be out of reach right now from the markets it needs to go to as there is voracious demand for refined gasoline all over the globe.

But the stocks, after a remarkable run, peaked in the middle of October and have had very few up days, giving you a classic case of what looks to be a parabolic top and it is hard, short term, to figure out what can rescue them as the quarters themselves could be weaker because of weather-related issues.

This moment is reminiscent of another time, back in 2011 when the charitable trust liked Cabot Oil & Gas (COG). It had the most lucrative wells in the Marcellus at the right places, just a quick pipeline away from the heavily-oil-based New England area. But the stock started down and people began to doubt the long-term story. The trust owned it and we fell prey to the negativity and sold the stock. Sure enough, it went a little lower and then it began a sustained advance as the story we bought it for panned out.

It was the classic case of the difficulty of running a public portfolio vs. a secret private portfolio.

Now, I know at times when people get frustrated with the markets (and therefore  me), the next question is "why bother to do it, you can't win?" To which I respond that there are so many people who want to know what professional portfolio management is doing, why not show them? Why not explain? Why can't I risk the catcalling to do something I feel is right to do: lift the curtain on how it is done professionally.

It's so easy to denigrate any attempt to do anything about stocks in a constructive way. Today I was on a radio tour to promote my book. I would say half the interviewers objected to my offering any advice to anyone, either because they didn't think it was worth it or didn't think I was qualified to do so. 

The former simply said, "isn't it best to either forget about the market altogether or go be in an index fund?" I answered that people actually like to pick stocks for themselves or with the help of a broker and I help them be a better investor or a client. To the ones who thought I wasn't qualified? Well, what can I say? You can't please everyone, no matter what you do. Which is how I feel, right now, about the oil stocks. You had to be long them, then short them, and eventually be long them again. Or you can just say " I think they are undervalued as I thought about Cabot three years ago and just take the pain to make the bigger gain."

But you know what the real bottom line is? If you believe in yourself, pay no attention to the critics. Don't look at or listen to what they say. They just don't get what Teddy Roosevelt called "the arena." They never will.

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