Feature Writer, InvestorPlace.com
It’s tough to make predictions, especially about the future, Yogi Berra is said to have said, and he only had to contend with six to seven months of baseball season.
When it comes to stock picks, time frames mean a lot. Are you looking for a quick score on a trade, or a long-term value play that will grow slowly over several years?
I tend to favor value investing. I like it when good stocks are beaten down. That’s when they’re cheap. By the same token, I don’t like stocks that are on a hot run — not for new money, anyway. But that means I miss out on plenty of upside, especially when momentum stocks are involved.
American Express (AXP) isn’t a momentum stock, but it sure had a head of steam in 2013. Back in May, AmEx was already up 19% on the year, touching record highs. The company had just hiked its dividend. And I said to stay away. AXP stock looked too pricey at those lofty levels; the easy money had already been made, I said.
Well, that was a mistake. Cost cuts, share repurchases and Street-beating results kept AmEx rising throughout the year. As we close out 2013, AXP stock is up 56%, beating the S&P 500 by a wide margin.
Sorry about that.
In defense of my buy-them-when-they’re-down strategy, I’ve been bullish on FedEx (FDX) all year. The stock was beaten down on earnings misses and profit warnings, and Wall Street sentiment was overly negative. That made FedEx look good to me back in March. Cost cuts, valuation, and stock buybacks all made FDX stock look attractive, I said.
FedEx continued to stumble for a couple of months after I gave it a buy call, but patience paid off. Like AXP, FDX stock is set to close the year with a 56% gain.