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.Look at the stock market the sameway.Sometimes stocks bend to oncoming traffic, but when you arein the right lane you ll make it to your destination. ccc_payne_285-310_ch12.qxd 3/13/07 8:02 AM Page 285CHAPTER12The Care and Feedingof Your Portfoliot s now time to set up your portfolio.You need to be positionedin several niches of the stock market rather than buying one stockIat a time to see how it works out before buying another stock.Try-ing to win big with one stock and an unrealistic holding period isthe number one destroyer of wealth in the stock market.Instead, you re going to approach investing with a level headand a complete game plan.I like to see investors begin with stocksof companies they are familiar with.It doesn t have to be thehottest thing around.You may want to go with companies thatyou feel are stable and that you have been able to ascertainthrough your own fundamental research are still undervalued.So where do you begin?Finding IdeasThe problem with just buying stuff you know or like is that youcould be late to the party, or maybe you re the only person wholikes that stuff.I remember the first time I went into a Costco withmy wife in 2001.I felt like Spanish explorer Ferdinand Magellan; Iknew other people had been there before me, and the store waspacked when we got there, but I felt like I had discovered theplace.Instantly it became a favorite stock of mine and one I tossout when folks stop me on the street for a hot tip.285 ccc_payne_285-310_ch12.qxd 3/13/07 8:02 AM Page 286286 ACT AND GET RICHOf course I was late to the party, but Costco continued to be awinner.There are millions of people who haven t yet had theirMagellan moment, although as the company s successes getgreater, so too will expectations.The stock is stable but could de-liver solid gains for many years to come.You could go out and buy stable stocks at any given time andhold them through cycles, the inevitable ups and downs, a naturalpart of life and business.So I want you to begin with a list ofnames of companies where you have a certain comfort level.Compiling Your List by Looking at the Worldaround YouIt s easy to get this list started.My son began attending a newschool when he entered fourth grade, and the route from thehouse was different and longer than the year before.On the sec-ond day of school, while driving home after dropping off my son,I noticed a solid portfolio blossoming before my eyes (on the firstday I, like all parents, had been beaming with too much pride andjoy to be cognizant of my surroundings).I got on Route 17 in NewJersey and I came upon the following sights:Stryker (stock symbol SYK).One of the nation s leading medicaldevice products, a well-positioned innovator of replacementbody parts like knees and hips, this is an industry that is guar-anteed to enjoy great growth as baby boomers get older butabandon the notion of slowing down to rocking chairs.Thisgeneration of old folks will be more active than any before; con-sequently there will be a lot of broken bones and worn-outknees, hips, elbows, and other joints.Federal Express (stock symbol FDX).Federal Express has an of-fice along this highway and thousands of other highways, too.But this is more than a domestic play: The company hasplanted seeds around the world, including a great strongholdin China.Federal Express is a great proxy for global commerce.The company also benefits from Internet commerce, which con-tinues to enjoy incredible growth.Moreover, the companydoesn t have a lot of competition, just UPS, DHL, and the U.S.Post Office. ccc_payne_285-310_ch12.qxd 3/13/07 8:02 AM Page 287The Care and Feeding of Your Portfolio 287CSX Corp (stock symbol CSX).I saw a truck with CSX Corp on the side, going by on an overpass, which was interestingsince CSX is the largest railroad on the eastern coast of theUnited States.I happen to be a fan of the rails.I think they makethe perfect proxy for the American economy.With that said, youhave to understand that the stock is cyclical and performs betterwhen the economy is strong and solid.When the economy slipsthe stock typically stumbles.There are business factors, how-ever, that favor this company no matter what the business cycle:The roads are crowded there simply isn t enough room onthe highways for truckers to meet demand, and even if therewere, there aren t enough people willing to drive trucks.Thesecapacity and personnel problems will fuel the growth of rails.As the rest of the world becomes richer, there is greater de-mand for U.S.goods, and those goods have to be carried tothe shippers.The biggest example of this is the surge in de-mand for U.S.coal from China and other nations, a trend thatwill only increase over the years.Then there was the usual array of restaurants that have becomeubiquitous in the American landscape.(I love capitalism, but it issort of sad that every stretch of road looks just like every other.In-dividuality is very important.) Of the restaurants McDonald s(stock symbol MCD) looms the largest, and not just because of thegiant arches logo that towers above its locations.The stock peakedin 2000 at $44 and tumbled all the way to $12 by early 2003.Sincethen the stock has come back as the menu has changed to healthierfare and helped to shed the negative image of the company.There were many other publicly traded companies in plain sightdoing business and thriving.So part of getting started is to look atyour immediate world.I would caution, however, that you don tget too enamored in loading up on stocks in industries that youknow very well.Sure, if you know the best company in your in-dustry and you look at the fundamentals and determine there isstill value, then by all means buy some shares.The key word hereis fundamentals; you can t let your feelings for the company and/orits products supersede the facts.If a stock is overvalued or if man-agement isn t up to the task, Wall Street isn t going to have theemotional attachment that you have. ccc_payne_285-310_ch12
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