Mix Your Portfolio

One of my absolute favorite companies is VCA Antech (NASDAQ/WOOF).

As part of my pet care investment theme, this mid-cap company remains a standout. It’s been a consistent wealth-creator over the last five years and I think it will continue to be an excellent holding going forward.

The stock is down from its recent 52-week high and this provides new investors with an attractive entry point. Over the past five years, this stock really hasn’t gone down in value for any significant length of time. The stock traded sideways in the last half of 2004, but then it resumed its upward trend.

I wouldn’t be surprised to see company management implement another two-for-one stock split in the near-future. The company’s latest financial results were great; the stock is reasonably priced on the market; and the veterinary business is almost recession-proof. What more could you want in a stock?

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There’s no doubt that it is very difficult for investors to consider buying a stock that’s already gone up in value. Everyone wants to buy low and sell high. But buying low means that your investment risk is very high. More often that not, there’s a good reason why a stock is in the dumper.

You can make money buying low and selling high, but I think you should mix it up a bit. Have some flyers, have some low-priced stocks, but also have some established successful companies with good prospects. These stocks are what you might call the “buy high and sell higher” type of investments.

So, here’s the point of this harangue: The best way to make money from the stock market on a consistent basis is to have mix in your portfolio. Not just a mix of different companies, but a mix of stocks that represents differing levels of investment risk. As I’ve said previously, I’ve found that boring, consistent growth stocks often make more money over time than super-high-risk flyers. In my mind, investing is all about investment risk, not potential return. When you take this view, I think you approach stock market investing in the best way possible–with a lot of skepticism!