Weekly Newsletter

The One Hit Wonder

I played a lot of baseball growing up. Each year, there always seemed to be a kid on the team who just couldn't hit, so he batted in the #9 spot where he couldn't do as much damage. Not surprisingly, it was the same kid every year, but I digress.

Sure, the guy couldn't hit a beach ball most of the time. But every now and again, the stars would align and he'd come through in the clutch. We dubbed him the "One Hit Wonder."

Fast forward 20 years, any time I get together with old teammates and reminisce about the good ole days, we don't spend much time talking about how the "One Hit Wonder" went 0'fer most of the time and batted .120 in his Senior season.

But you can guarantee someone reminisces, "Remember that time you hit a 3-run walk-off homer to send us to the State tourny? That was awesome!"

Just like baseball, a single hit in investing can undo a lot of mistakes. The below chart shows the growth of $10,000 over 30 years. In the example, $1,000 is invested in 10 individual stocks. 9 out of 10 go to $0, but 1 compounds at 15% for 30 years.

In the end, your portfolio compounded at nearly 15% and you ended up 6x'ing your original investment. So, did it matter that you struck out 9 times out of 10? Nope. Just imagine the results if you hit 2 out of 10.

Be the "One Hit Wonder" in investing...and wear the nickname proudly.

The Lovesac Company

I covered the Lovesac Company (ticker: LOVE) in a recent article for Seeking Alpha. It's a stock I own in my 401K. The company sells modular couches and oversized beanbag chairs. Coupled with a name like Lovesac, it's almost comical. But LOVE is quite intriguing. It's a profitable, small cap ($400 million) growth company with an innovative product catering to upper middle class, 20-to-40 something year-olds. Plus, it's cheap, with a forward P/E of 12 after falling out of favor in an environment of rising interest rates and sinking home values. But where others see storm clouds, I see opportunity.

Here's a link to Lovesac's Investor Relations site. I encourage you to do your own homework.

Quote of the day

Tip of the day

Approach each stock purchase like you only have 10 in a lifetime.

If someone gave you a punch card and said you only get 10 stock picks for a lifetime, you'd be very selective in your choices. You'd want to make sure each one of your picks was well researched and fully understood. You'd want strong conviction in your picks. This should be your mindset.