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Welcome to Profit Confidential • Tuesday, May 22, 2012

Further Importance of a Mixed Portfolio

Thursday, August 16th, 2007
By Mitchell Clark, B.Comm. for Profit Confidential

The best way to describe this market is to say that it’s in a bad mood. The correction is here and it’s going to stay a while. When sentiment gets this negative, no good news makes any difference.

We’re always just guessing, but in my view, this correction is going to last a couple of months. Accordingly, investors shouldn’t get their hopes up about making a fortune on their speculative equity positions.

At the beginning of the year, stock market sentiment was positive enough that you could generate some serious returns. China stocks and alternative energy stocks were the hottest. Now, nothing is hot, and so we all have to roll with what the market dishes out.

You’ll notice that some strong companies out there aren’t going down in value very much. One of my longtime favorites, VCA Antech, Inc. (NASDAQ/WOOF), is still trading near its 52-week high. In my mind, this is a really good sign of a strong, solid stock that can handle just about anything.

This leads me to say just how important it is to have a mix in your portfolio. I view all stocks as speculative investments. Even the best blue chip stocks can experience significant turmoil. If Procter & Gamble can lose half of its value in just one quarter, anything can happen to any stock.

One of the reasons why I like VCA Antech is because of the business it’s in. The pet care business is solid. I like to think of it as recession-proof. So, while the stock market is going crazy, this stock just stays steady. When the stock market is hot, this stock ticks higher, but it doesn’t get all hyped up.

My contention has always been that the best speculative equity portfolio to have over time has a mix of high-flyers and companies like VCA Antech. A recession-proof business is always going to do well on the stock market over time. If you have a few companies like this in your portfolio, it makes it a lot easier to sail through the tough times like we’re currently experiencing. If you’re all in China stocks, the party can end very quickly.

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Profit Confidential AuthorMitchell is a Senior Editor at Lombardi Financial specializing in small-cap stocks. He’s the editor of a variety of popular Lombardi Financial newsletters, such as Penny Stock Reporter, Micro-Cap Stocks, and Monster Profits. Mitchell, who has been with Lombardi Financial for thirteen years, won the Jack Madden Prize in economic history and is a long-time student of equity markets. Prior to joining Lombardi, Mitchell was as a stock broker for a large investment bank. While Mitchell is not working he enjoys fly fishing, motorcycling and tending to his hobby farm.

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