You Can Learn From Others

I was participating in a business book club review earlier this week and to my surprise part of the discussion came around to talking about how to find good stocks.  The gentleman giving the exampled talked about a senior men's investing club that started to think about what stocks would do well with the coming Hurricane Sandy?  People want to maintain power, so who makes generators?  Answer, Generac, GNRC.  Not only do they make portable generators, but they actually make stand alone systems that can power your entire house by hooking into your natural gas line and avoiding the need to refill with gas which became an issue during the Sandy storm when there was no power to actually pump gas at the stations.

Another example that the investment club brought up was what stocks would do well with an Obama win.  For whatever reason someone in the club though about guns.  Now why would guns sales go up with a Obama win?  My rationale would be the very conservative people out there wanted to become a little bit more protected, but I'm just guessing.  But lo and behold, guns stocks such as Smith & Wesson SWHC and Sturm, Ruger & Company RGR spiked this week while most stocks were heading lower.

We did a post back in July titled, Anyone can be an economist.  At the time we were discussing how to take advantage of the drought conditions that were crippling the country.  Once again we point out that when you can put a thought process together and back it up with some solid judgment and possibly some data and analysis, you can be a successful investor by taking advantage of short-term or current trends.

I often tell people that tips are for waiters when it comes to picking stocks.  However, going out and blindly buying a stock just because you heard something about it isn't a good enough reason to make a purchase.  Peter Lynch was famous for this when he was racking up historical returns while managing the Magellan Fund at Fidelity.  Taking a trip to the mall to see what was new, to look at where the people were, and to try and spot new trends proved to be very advantageous for Lynch.

The point is, keep an active mind when it come to these types of situations.  And just as important don't be afraid to act when the moment is right.

The piece below is a home video of a Generac backup generator system for your home that runs off of your gas line.