November 22, 1997
Portland, OR
Financial Freedom

December 13, 1997
Atlanta, GA
Financial Freedom

January 24, 1998
San Francisco, CA
Financial Freedom

February 14, 1998
Maui, HI
Advanced Seminar

March 6 & 7, 1998
Phoenix, AZ
DDS Boot Camp

April 25, 1998
Orlando, FL
Financial Freedom

We remind doctors attending our financial seminar that the great stock market investors like Peter Lynch and Warren Buffet recommend a value approach to selecting stocks. The value approach is based on investing in companies whose stock is undervalued and will, in time, see their stock prices manifest that undervaluation. We take great pains in the seminar to point out to listeners that if they are not willing to learn what value investing is and do the homework necessary to select companies that meet the value criteria (as taught by Peter Lynch and Warren Buffet), they are counting on the current market euphoria to go on indefinitely.

If today's market optimism subsides, unsophisticated investors will have to face the fact that they really don't know what they invested their money in. Someone has told them that stocks are hot and there is no way they can lose, and the market's recent gains have done little to prove otherwise. Today's market makes me think of a gambler in Las Vegas who has just seen the same Keno numbers come up five times in a row and finds himself tempted to bet his house on the next hand. Today's investors are starting to believe that regardless of the daily ups and downs, the stock market is on a nonstop rocket ride to the moon.

I see investors all around who readily admit that the future of the stock market is unpredictable, while they continue to buy stocks and funds they don't understand in the least. This is a contradiction of the highest order. A famous reply of the unsophisticated stock market investor to warnings about market risks is to simply say, "Since I am in for the long run and stocks always do great over time, I really don't have anything to worry about."

Peter Lynch and Warren Buffet have warned of the dangers of thinking that just buying and holding a random group of stocks will insure a positive outcome. Both of these investors have sighted long lists of famous companies whose stock prices plummeted, never to recover. Warren Buffet is quoted as saying that if you want to "buy and hold" stocks you need to have a "buy and hold" portfolio. This means you need to have a portfolio of stocks that are underpriced to begin with. Only then can you expect that time will offset the negative effects of a depressed stock market or a setback in the price of a particular stock.

In conclusion, if you want to buy stocks or wonder if you should keep the ones you have, keep in mind that most articles in print today are written to address the question of timing your exit from the market - to avoid the inevitable crunch. If there is a crunch or correction you may be left with stocks that were overpriced to begin with, leaving little hope of recovery. My advise is to read Peter Lynch's book, One Up On Wall Street, and The Warren Buffet Way before deciding where to land on the issue of buying or keeping stocks. Learn what the "fundamentals" of stock valuation mean, as well as learn how to spot a company with a great "story", as Peter Lynch puts it.

Someone who tells you stocks are an investment slam dunk or no one who holds onto their stocks gets hurt, is not giving you the whole story. If you choose to buy or keep stocks, do the homework necessary to buy value in the truest sense - stocks that relative to their intrinsic value are underpriced.