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With apologies to Dennis Hopper, but it’s gotta be real, man, and real good for a long time, man.

Well, man, the stock market is the most real place in the world. Every day things happen in our world, and it is immediately reflected in the stock market.

I can tell you that Canadian Pacific (NYSE: CP) is worth $60 a share, but that doesn’t mean anything right now. Today CP is trading around $36, and that is what it is worth today, for sure.

The stock market will always be about figuring out the future of a company, good or bad.

This is no easy thing to do.

Let’s take a look at JDS-Uniphase (Nasdaq: JDSU). If you will check the archives of my columns written here, you will see I have been steadily bashing this stock.

The first time (March 2), it was $30.

But how can this be? What went wrong? Last year JDSU was selling for $150 a share, and everybody (and I mean everybody) on Wall Street loved it.

Wall Street pundits appeared on the airwaves daily; singing the praises of this (developing) disaster, assuring us this was a “new economy” stock. Just go ahead and throw out that traditional price-to-earnings ratio mumbo jumbo stuff; this was a new millennium and you’d better get on board.

Ah, but look what happened: Today, JDSU languishes in the $9 area. I predicted long ago JDSU was a $5 number, and it soon should be. Oh, it may rally a little on the way down to $5, but that’s nothing more than a dead-cat bounce.

Look what JDSU faces in the months ahead:

  • Lots of competition from many competitors, all in the same bullring.
  • Chasing a shrinking market.
  • For JDSU to get new business, it will have to go diving into the fray, offering low bids and cut-rate prices against shrinking opportunities.
  • And what about all those lovely acquisitions JDSU did in the last few years? Oh, with the quick swipe of a bean-counter’s pen, like magic, they have pretty much been dumped out the back door. If you haven’t got the message yet, I will tell you loud and clear: Most every acquisition JDSU made, it paid way too much money for.

Maybe that’s why JDSU management, much available to the media last year, is often nowhere to be found this year.

Of course the beauty of all this is that the analysts on the Street have ridden this Titanic all the way down, doing fancy little things with their “buy-hold,” “accumulate,” “market-performer” tricks that they do so well.

Lets face it: You see a “SELL” recommendation on Wall Street about as often as you see a Democrat that is for a tax cut (how about … never?).

So, what this “game” of picking stocks boils down to is what I have said here before, and will say again: It’s your money and nobody cares about your money as much as you do. So do your own homework, trust no one, and think, think, and think. And do that before you buy, not after.

It actually would not be such a bad market if you take out the techs. Day after day, I watch the red go across on the tape, and it is most often in the tech-telecom area. This has been a brutal bear market in tech, but for many stocks it has been pretty good.

Last year at this time Smithfield Foods (NYSE: SFD) was $28; today it is $44. Boston Private Bank & Trust (Nasdaq: BPFH) was $12; today it is around $22. United Commercial Bank of California (Nasdaq: UCBH) was $15; today it is $31. Canadian Pacific was $26; today it is $36.

So things aren’t too bad for many investors, only for those that (sinfully) got over-committed in one sector.

The hardest thing to have in life (and the stock market) is discipline, combined with patience.

I point your attention to Warren Buffet (Berkshire-Hathaway, NYSE: BRK a or b) as the master practitioner of both of these important talents successful investors must have.

Here is where you might want to start:

  • Find the dominators, the best at what they do, one with a good “moat” around their business.
  • If you want growth for the next 20 years in a big company, then you want a company that will be a player in the overseas markets; that is a must.
  • Look out for a company that has a good track record of being good to shareholders.
  • Also, one that is full of free cash flow and sports a muscle-bound balance sheet.

There you go; now you have the requirements for building a successful portfolio for the long haul.

Here are some of my favorites that have passed our “smell” test we listed above.

American International Group (NYSE: AIG), Berkshire-Hathaway (NYSE: BRK a or b), British Petroleum (NYSE: BP), Boeing (NYSE: BA), Canadian Pacific (NSYE: CP), Exxon (NYSE: XOM), Hershey’s (NYSE: HSY), Microsoft (Nasdaq: MSFT), Merck (NYSE: MRK), Pfizer (NYSE: PFE), Schlumberger (NYSE: SLB), Shell Oil (NYSE: SC), Smithfield Foods (NYSE: SFD), Tetra-Tech (Nasdaq: TTEK), and John Wiley & Sons (NYSE: JW a or b).

Now go, do your homework. It’s your money!


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