Page 309 - How to Make Money in Stocks Trilogy

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• C HAP T E R •

L = Leader or Laggard:

Which Is Your Stock?

People tend to buy stocks that make them feel either good or comfortable. But
in a bull market populated by dynamic leaders that just keep surprising
on the upside, these sentimental favorites often turn out to be the dullest
laggards.
Suppose you want to own a stock in the computer industry. If you buy the
best performer in the group, and your timing is right, you have a crack at
real price appreciation. But if you buy a stock that hasn’t moved much, or
that has even fallen to a price that makes it seem like a bargain and there-
fore safer, chances are that you’ve picked a stock with little potential.
There’s a reason, after all, that it’s at the bottom of the pile.
Don’t just dabble in stocks, buying what you like for whatever reason. Dig
in, do some detective work, and find out what makes some stocks go up
much more than others. You can do it, if you work at it.

Buy Among the Best Two or Three Stocks in a Group

The top one, two, or three stocks in a strong industry group can have unbe-
lievable growth, while others in the pack may hardly stir.
The great computer stocks in the bull market of 1979 and 1980—Wang
Labs, Prime Computer, Datapoint, Rolm, and Tandy—had five-, six-, and
sevenfold advances before they topped and retreated. But the sentimental
favorite, grand old IBM, just sat there, and giants Burroughs, NCR, and
Sperry Rand were just as lifeless. In the bull market of 1981–1983, however,
IBM sprang to life and produced excellent results.

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