It shouldn't be this easy. We shouldn't be able to say "hey, baby, it's cold outside," and go buy the stock of Canada Goose (GOOS) , and make money. We shouldn't be able to say, "we should buy the shares in the do-it-yourself auto parts companies, because cars collide in the cold and corrode in the snow," and actually profit from the common sense of it all.
Nor should we be able to buy the stock of Home Depot (HD) because it does well when roofs sag and pipes burst and you need to shovel your yard.
But it's working.
Those of us who have spent the last 17 years accepting that you simply can no longer profit from what I would call knowledgeable observation are struggling to come to grips with a market that's reminiscent of a different time, before we became so cynical and so accepting that stocks have simply stopped being in synch with the companies underneath them.
Now, I am not going where you think I might be: that stock picking is back and index funds and ETFs are dead. Those days aren't coming back, because there are too many trillions of dollars invested in indices, with billions more coming their way.
But I am saying that it's possible to pick a group of stocks that certainly are better than average, and the disparities are pretty shocking.
Now, that's been the case for FANG -- Action Alerts PLUS holding Facebook (FB) , Trifecta Stocks name Amazon (AMZN) , Netflix (NFLX) and Google parent Alphabet (GOOGL) -- for ages. The market caps of these companies, as my writing partner Matt Horween mentioned to me recently, are suggesting that the law of large numbers may have somehow been repealed.
It's incredible that companies' valuations have finally gotten to levels that were considered impossible, because no enterprises can sustain such lofty levels as Facebook at $537 billion, Amazon at $582 billion, Alphabet at $757 billion and Apple at $880 billion. You would have thought that these would have toppled at some point. Instead, they represent the winners in their almost winner-take-all loser-take-none categories.
But now it's most broader than just FANG. It's cold out, so you buy natural gas stocks and you make money. Trump says he's going to open exploration off all of our shores; buy giant oil service company Schlumberger (SLB) , you make money. McDonald's (MCD) offers a dollar menu that's cheaper than what others have, you buy it, you make money. Some guy on TV says Amazon's (AMZN) going to buy Target (TGT) , you buy it, you make money.
A president favors defense spending, you buy the defense stocks, you make money. I can list an endless number of observational opportunities that would have either already been picked over or simply wouldn't have worked at another time because the companies will almost always disappoint when you finally got to the equivalent of the finish line, the quarterly earnings report.
But that's changed. A combination of a trampoline of index money, competition due to low interest rates and new investors actually coming back to the market is making stock-picking fun again, and rewarding, provided that you aren't buying total clunkers that don't deserve to go up no matter what.
And who can blame people? We are in an era when Elon Musk can constantly make and miss projections and Tesla's (TSLA) stock goes higher. We have pot companies with barely a lick of sales that have $6.0 billion valuations.
So why shouldn't a company that has a good product that can make hay when the sun shines not go higher?
I point all of this out because I know that observations aren't rigorous, and for almost two decades picking stocks with no rigor almost always cost you money. I don't know how long the obvious will keep coining you money. Probably when we all realize that's what's happening and the gray beards give in and start buying.
Can we just agree to this one precept: the less you know about securities and the more you know about common sense has never made you this money. Enjoy it while it lasts.