When we buy a stock we're right, everyone else is wrong.
I'm just about to head off on my hols. France if you must know, probably Spain too. After the stress of moving house, I really need the rest! Trading shares is easy compared to moving.
But let me leave you with some food for thought before I go.
When we go in and buy a share we think we are making the right choice.
After all, we made an effort.
We did our research, we did TA, we looked at the charts. Maybe even scanned ADVFN's level 2. Waiting to get our timing right.
Except for some of you eh.... who just went on a bulletin board and because some bulletin board bloke "filled his boots" with this "ten bagger" you bought it. I know your type.
But who knows? Some of you may have even looked at the bollingerband stocastics macd crossover elliottwave deadcrossricepudding signals. And any other cobblers you could find to validate your choice.
The trouble is, you see, us blokes (and it is nearly all blokes) who trade... once we have made up our mind and pressed the buy button, that is it.
We are now "in". We expect this share price to rise because we are pretty good at stock picking, right?
And once we are "in" the next thing is to look around and make sure our choice is validated by others.
So it is off to the bulletin boards to check everyone else agrees the share is going up. And boo sucks to any moron who thinks differently, right?
Anyone who thinks the share has got problems is a total turdbrain. We're right. The charts say so. And the fundamentals. And the tipster bloke. And anyway there's going to be a bid next week! That bulletin board bloke knows his stuff.
And so despite the share price continuing to go down we will continue to scour the internet for more validation of our choice.
Sell it? Are you crazy? Time to buy more! Look how cheap it is now!! It is purely money lent! The markets always get things wrong. The market is such a moron!
Now it's got even cheaper, Well that is GREAT news. Look at the price I can get it for now, it's like the sales. I'm in for MORE
Okay, so you know what I'm getting at.
What should we do instead of trying to get the validation that we are right about the share? Instead of always thinking we got it right?
We should do the opposite. Indeed, the hardest thing in the world to do.
Start again and maybe, just maybe, consider we were wrong. And perhaps even worse, consider getting out before it gets worse.
We should look at the alternative argument.
In fact we should imagine looking at this share in six months' time. It has fallen 50%. Why did it happen and how could it happen?
Could we end up with a stinker on our hands?
What if we were wrong? What if the oil it is supposed to have turns out to be water? Hang on, what about the big debt? Never noticed that.
Hang on, when I looked at the chart the gapuphangingmancrossover was pointing up. Now, well maybe...
And maybe the one guy on the bulletin board who was spelling out the problems with the share, is it possible he was right and the rest of us wrong?
But then there comes another problem. If we sell it now we validate the fact we got it wrong and we took a big loss.
Now we can easily talk ourselves out of selling it. "There'll be a bid the minute I sell it". "Oh well I lost a lot already might as well stay in". "Too late to sell it out, I'm stuck with it."
In the end it is always the same story: it is always better to cut the loser quickly and realise you got it wrong. And you can always go back in lower.
Okay, as you realise that was a boring old fart lecture and it is now over. Go back to not selling your stinkers and see if I care.
Moving on to what you really want to know and that's some buys!
I'm taking the summer off writing about finance and I'm going to laze about beaches but I'm going to leave you with some ideas for longer-term trades that won't go bust. (But I am willing to change my mind if question marks appear).
Indeed my dentist asked me the other day which shares would I buy with a three year view - companies whose share prices should be nicely higher plus some income?
Good question. So I leave you with a few shares I think are unlikely to be down by 50% quickly because they didn't find oil etc.
And all these have a great chance of being much higher down the line ignoring the usual market ups and downs.
Dialight: First mover advantage in the LED market. This market continues to grow and over time so will DIA's share price. I would suggest another 50% to come, ignoring short-term volatility.
Coastal Energy: Canadian listed AIM stock that can go in an ISA - it really has got some oil and keeps finding more. Already been a takeover target once and would be surprising if it wasn't taken out at a much higher price at some point.
Telecom Plus: Already made my fortune with these but there is more left. Great management and business model and supplies things everyone needs: utilities and telecoms. Could be in the FTSE 100 in a few years.
Dignity: We are all likely to use this company at some stage. Yes, we are talking death. It's buying up all the other funeral directors. And given more of us are dying apparently there is only one place for the share price to go over time... up. And so we may as well cash in. They don't do a discount on coffins for shareholders, I did ask.
32 Red: Nothing like investing in a bookie, they hardly ever lose, do they? And this is one of the last smaller ones left on the market so looks a likely takeover target sooner or later. In any event it's making a mint on bingo and poker. Bingo online is huge. People love playing internet games that they are certain to lose over time. Go figure and take advantage of these losers.
HIlton Food Group: Supplies processed meats etc across Europe. As people get lazier and lazier about their food they buy more and more packaged products like ham. And so the share price over time is only going one way.
HellermanTyton. A hell of a name but a hell of a new issue. Rising profits and a good market make this one that should be nicely higher as time goes on. Should also get into the FTSE 250 next month or in September, raising its profile.
Al Noor. A chain of private hospitals in one of the richest areas of the world. As the population ages, so this company should do very well out of it and a potential doubler over time.
Xaar. Brilliant company in the perfect sector and if 3D printing takes off could become a big winner.
Fusionex. Thought I would leave you with something risky on AIM. Already a few quid up on this one, its business plan looks terrific and could be a surprise boomer.
Well, I reckon if my dentist tucks a few of those away his portfolio will look pretty good in 3 years.
But if I got those wrong I am definitely going to need a new dentist as I don't fancy being in the chair if I gave him some stinkers... ouch!