This Year’s Losers… Can Be Next Year’s Winners

“To invest successfully over a lifetime does not require a stratospheric IQ, unusual business insights, or inside information.  What’s needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework.”

-Warren Buffett

Most of us were taught to buy low and sell high. Even if we weren’t, the concept seems logical to almost everyone. Ask youself – would you rather buy things at top price, on sale, or clearance? Would you rather sell things at the peak of their value, break even, or at a loss? Easy answers… right? Still, this wisdom proves to be very emotionally difficult for most investors to actually do.

It has been said that when you are at the pinnacle of fear, you should do the exact opposite of what you want to do. Of course this is always easier said than done.

Let’s examine the idea of investing next year in what did poorly this year.  We’ll start by looking back at a few examples:

• 2012:  Some of the worst performing stocks of the year were Best Buy, Hewlett Packard, and First Solar. In the first 6 months of 2013, these stocks were up an average of 90%!

• 2011:  If you can remember back to the end of the year 2011, everybody was down on financial stocks. As an example, Bank of America dropped over 30% during the last 4 months of the year. In 2012, the financial sector was up over 25% and Bank of America more than doubled!

Will history repeat itself going into 2014? Will this year’s losers become next years winners?

Now is the time of year when people in the investment industry start coming out with their “year in review” as well as their “outlook for 2014”.  We look forward to bringing you some of the thoughts from industry leaders we consider to be the best and the brightest… just take a look at this recent Forbes post and another by Money News to get a taste of this typical review/outlook style.

We have our own outlook for how to best protect and grow capital moving forward. The tough question is: How hard is it to ACTUALLY do the opposite of what you think you should do?

Categorized in: Blog

This post was written by Conscient Capital