Sowing and Reaping in the Equity Market Garden

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Includes: DIA, QQQ, SPY
by: Mike Goodson, CFA

I grew up in Montana (quick -- how many famous Montanans can you name? See my list at the end of the blog) and many people I knew there were close to the land. Anyone who lived just outside of the city limits seemed to own sheep, cattle and/or horses. The west end of town, which is now covered in residential homes, was farm land when I was a kid. The principle industries of the state have long been mining, agriculture and lumber.


Even though I grew up in the "city" (urban Montanan -- there's an oxymoron for you!), I could appreciate the hard work that miners, ranchers, farmers and lumberjacks put in each day to keep the economy rolling. Enamored so much with the concept of working the land, I even married a young woman from a farming background. To me, the most impressive concept of farming and similar endeavors is the law of the harvest. That is, one reaps only that which he or she sows. As anyone who has tried it will attest, there is no fast money in farming.


There are no short cuts in growing a tree or raising a calf to maturity. All of these endeavors require patience, constant diligence and a steady application of the right elements (water, fertilizer, feed, etc.) to achieve the desired outcome.

I use this farm analogy to explain how I view the equity market.

To some, the stock market is just a fast money machine, a slot machine, if you will, with tickers instead of tumblers. I respect that approach and feel it may be appropriate for others, but not for me.

I view the stocks in my portfolio as my "crops." I "planted" them when I bought them. Buying cheap stocks as I do gives me the expectation that they will some day "bloom" and become more highly valued than when I bought them. Sometimes the harvest is a long time in coming. Sometimes the plant dies (the investment thesis is broken) and I have to sell at a loss. Sometimes the seed mutates and I get a full grown plant much sooner than expected (I am happy to take lucky short-term profits when I can).

But mostly, I watch over them, monitor the fundamentals and patiently wait for the harvest to come. It's not very exciting work at times. But the thrill of seeing a stock reach full valuation for the reasons I expected is well worth the wait.


For an assessment of which of my holdings are closer to harvest time than others, please refer to my private blog.

My list of famous Montanans: Evel Knievel -- the motorcycle daredevil (I actually knew his cousin Bobby), Chet Huntley -- TV news anchorman for NBC, Dave McNally -- pitcher for the Baltimore Orioles who has the distinction of being the only pitcher ever to hit a grand slam home run and thereby win his own game in the world series, Jeanette Rankin -- the first woman elected to the US Congress and the only member of that body to votes against our country's entry into WWII (she was a hard-core pacifist) and Gary Cooper -- the iconic actor.

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