I’m often asked about the best advice I’ve ever gotten over the years.
I’m blessed to have amazing friends, family, and mentors who have helped me throughout my life and my career.
I wouldn’t be here without them and their wise words.
But the worst advice?
What’s the worst piece of advice I’ve ever gotten?
‘Funnymentals’
“Buy companies with good fundamentals,” they said…
Well, they lied to me. And they’re lying to you too!
We don’t want to buy stocks that have “good fundamentals.” We want to buy stocks that are going up in price.
There’s a big difference. And one doesn’t necessarily translate into the other.
Here’s a chart that shows just how well certain companies have performed compared to other types of stocks:
During this point in the cycle, the companies with the best fundamentals are some of the worst-performing stocks in the world.
So, do you want to own stocks with good fundamentals? Or do you want to own stocks that are going up in price?
I just spent the past few days in Las Vegas with some of the greatest who ever did it.
Everybody is here. But, still, not everybody gets it.
Many still believe that buying companies with good fundamentals is the best way to proceed.
But they’re misleading you. Or maybe they’re just really bad at math.
The truth is that, sure, sometimes buying companies with good fundamentals works in your favor. But many times it does not.
Again, it’s not the fundamentals that pays us. It’s not the company itself that determines our potential profits.
It’s the stock. It’s the trend. And it’s only our ability to sell things at higher prices than where we buy them that determines our profitability.
So, buy companies with good fundamentals?
Yeah, sure, sometimes.
But buying stocks that go up in price makes investors money every time.
It’s not the fundamentals that pay. Only price pays.
Don’t get it twisted.
Fight trends at your own risk. But I don’t recommend it.
Stay sharp,
JC Parets, CMT
Founder, TrendLabs