STREET DOGS

Stocks rarely perform in the time frame we expect. It’s why the market tends to only work for investors that have a long-term portfolio focus.

“I’m accustomed to hanging around with a stock when the price is going nowhere,” said Peter Lynch. “Most of the money I make is in the third or fourth year that I’ve owned something.”

But how do you know when you’re right as opposed to just being stubborn? Sustainable multibaggers have these characteristics: long-term revenue and earnings growth with little to no dilution. When you are holding on to a position ask yourself: is this business growing and making more money per share than it did a year ago, two years ago? If the stock price hasn’t gone anywhere but the business is doing well you should have no problem holding. If the business isn’t performing, that’s a different story.

Read the press release. What happened in the last reporting period? Is it a positive report in which management talks about opportunities and delights in its past growth or does management talk about the many “challenges” facing the company? Was its earnings guidance raised or lowered? Are there any potential catalysts such as new product introductions or potential acquisitions that might help drive the stock higher? The language that is used in company media releases is very deliberate. It is reviewed by many eyes in both the media and financial institutions. An upbeat report is an especially good sign, while a report containing muted language should be viewed with suspicion. As should overly upbeat reports.

Successful investors can differentiate business performance from stock performance and take advantage of those who can’t. If you’re invested in great businesses that continue to grow and earn more money, don’t let lulls in stock price and boredom scare you out of them.