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How Our Ideas Will Perform Even Better in 2008

By Dr. Steve Sjuggerud
Monday, December 3, 2007

This year has been a great one for subscribers... and today I'll share with you why I think we can do even better in 2008.

This year, we've booked triple-digit profits on two of my last seven recommendations in True Wealth. And Sjuggerud Confidential subscribers recently took profits on our first thousand-percent winner. The stock went from a price of two bucks and change to more than $30 a share when we recently sold half.

In short, 2007 has been an exceptional year. But I've made some mistakes, too.

To me, the biggest mistake has come down to not following one of my own rules...

I know better... but I still made the mistake! I can't believe it.

My big mistake this year hit home to me as I read a recent New Yorker article about infamous speculator Victor Niederhoffer.

Niederhoffer is undoubtedly a smart man. He has all the titles you can collect from Harvard and the University of Chicago. He was George Soros' right-hand man and put up some of the most extraordinary trading numbers in history... and he must have reached the point where he believed in his own hype. In 1997, his hedge fund went bust in one day. He took on too much risk and lost virtually all of his customers' money. It was a spectacular failure.

You'd think such a smart man would have learned his lesson. You see, Niederhoffer got back on track the past few years, trading his way to wealth again, and making millions for his investors. But in the subprime mess of the last few months, it appears he's done it again – he's lost most of his investors' money and closed down his fund.

Niederhoffer still hasn't learned his lesson.

He told the New Yorker that his basic ideas – "buying in panics, buying on weakness" – haven't changed. Speaking of going bust again, he says: "I don't think what has happened has anything to do with that stuff."

Niederhoffer shows no signs of learning a lesson: "I am going to keep going, for better or worse."

Here at DailyWealth, we look for three things in an investment: We want an investment that is 1) Cheap, 2) Hated, and starting an 3) Uptrend.

This year, my primary mistake has been pursuing financing companies and homebuilders too early – I had No. 1 and No. 2 going for us. But No. 3 was nowhere in sight.

Maybe I was bold enough to buy because I'd had such success recently. But I know that you can't tell the market what to do... it's the other way around.

In 2007, I didn't wait for No. 3 often enough. So we've been early on regional banks and homebuilders, for example.

Both sectors have had a strong week. Is it the bottom? I don't know. But even this week's big moves (we're up more than 10% from the bottom this week in homebuilders) don't make up for the losses yet.

Niederhoffer is a smart guy. But it seems he doesn't give enough credit to risk control... the "impossible" has happened to him now... twice.

In 2008, we will have trailing stops on everything, to limit our downside risk. We'll be extra careful with illiquid positions, but we will use them.

And in 2008, we will not enter a position that is still in a downtrend. I can see cheap and hated... I can see opportunity. But if the uptrend hasn't started yet, either I'm wrong or I'm early (which is often expert speak for "wrong"). You may disagree with me about this trend stuff. But it works for me. It keeps me, and my readers, in the money.

This year has been a great year... but we could have done a few things better.

We will in 2008.

I hope you'll be along with us for the ride...

Good investing,

Steve





Market Notes


NEW HIGHS OF NOTE LAST WEEK

Massey Energy (MEE)... coal
CONSOL Energy (CNX)... coal
Alpha Natural Resources (ANR)... coal
Monsanto (MON)... agriculture
Badger Meter (BMI)... water meters
Deere & Co. (DE)... agriculture equipment
Lindsay Corporation (LNN)... irrigation equipment
Morningstar (MORN)... investment research
Deutsche Telecom (DT)... German telecom
Chunghwa Telecom (CHT)... Taiwan telecom
Vimple Communications (VIP)... Russian telecom
Partner Communications (PTNR)... Israeli telecom
Transocean (RIG)... deepwater oil driling
Reynolds American (RAI)... cigarettes
Procter & Gamble (PG)... the "basics"
Colgate Palmolive (CL)... the "basics"
Johnson & Johnson (JNJ)... the "basics"
Altria (MO)... the "basics"
Soybeans and Cobalt


NEW LOWS OF NOTE LAST WEEK

West Marine (WMAR)... recreational boats
St. Joe (JOE)... Florida real estate
WCI Communities (WCI)... Florida condo meltdown
Tejon Ranch (TRC)... California real estate
Vornado Realty Trust (VNO)... huge diversified REIT
Equity Residential (EQR)... largest U.S. apartment REIT
Boston Properties (BXP)... largest U.S. office REIT
D.R. Horton (DHI)... homebuilder
Toll Brothers (TOL)... homebuilder
Beazer Homes (BZH)... homebuilder
Building Materials (BLG)... you guessed it
Men's Wearhouse (MW)... clothing retail
Stein Mart (SMRT)... retail
Bed Bath & Beyond (BBBY)... retail
Home Depot (HD)... home improvement
La-Z-Boy (LZB)... home furnishing
P.F. Chang's (PFCB)... restaurants
Ruby Tuesday (RT)... restaurants

– Brian Hunt


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