CHAPTER THIRTY-ONE

MAKE LONG-TERM MONEY WITH SIMPLE THEMES

From age 10 on, it seems to me everyone wants to complicate our lives, not simplify them.

There are endless ways to analyze the stock market, its trends, fads, and individual companies. My own style is to be a contrarian, to go against popular sentiment. Then, when I identify areas I think are undervalued and unappreciated, I tend to move into them aggressively. This means overweighting the groups I like. For instance, on a mythical $1 million portfolio, if I like health-care stocks, I could buy two stocks that might make up 20 percent of the portfolio, or $100,000 in each of two companies. This strategy is risky, and I feel that I'm basically a conservative investor. But I like to be aggressive in places where I feel the downside is limited. There's the simplicity side of this contrarian-themed strategy, told with three examples:

  1. In the late nineties, oil was selling at approximately $20 a barrel, and energy stocks were seriously out of favor. I depend a lot on smart friends and clients all over the world who do research for me. I pay little attention to most Wall Street analysts, preferring my own feet-on-the-ground perspective. You can do this, too, and again, it all comes down to relationships.

    You will, as your business lives expand, have new friendships with people in different fields. You will also have your old friends and classmates from kindergarten on, who go out into the world and develop expertise in endless ...

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