Cyclical vs. Secular Growth Stocks
Wed 17 Oct 12 | 06:45 PM ET
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here's a serious
conundrum, how on earth are
you supposed to pick stocks
for the long haul when
sectors are going in and out of style in the wall street fashion show? how do you buy something when in
reality that's not the way
the game has started to
work anymore. there are very few stocks you
can just keep on riding
higher and higher.
year after year, but when
you find them, they are
the holy grail of
investing. and those don't
go in and out of vogue,
just with the fashion show
analogy. all right.
like i told you before,
there's no such thing as a
stock you can own
forever. that's the
essence of the kind of buy
and hold thinking that's lost so many people such huge sums of money over the years.
but some winners are more
lasting than others. and there's a certain type of
stock that can produce
incredible multi-year
gains. and they can be
owned for much longer than
what i regard as ordinary
stocks. i'm talking about
what's known as secular
growth stocks. that's a
rare breed that you should
always be on the lookout for. these
companies are driven by powerful long-term stories that transcend the strength or weakness of the underlying economy. most companies need a healthy in
order to thrive, we call
that cyclical
growth. but a true secular
growth story can deliver
fantastic numbers, even in
a lousy economy. numbers
so consistently good they
can keep powering the stock higher quarter after quarter after quarter year after year
after year regardless of
the economic
environment. how do you
spot a general secular
growth name? i like to
look for big picture themes. a
company on a much broader trend. take
the healthy eating in this country and embrace of natural and organic foods. this has made whole foods the
go-to supermarinto a power
house stock, also destroyed
the regular supermarkets
and the same thing goes
for haines celestial,
it's not your average consumer packaged goods company. however, while these stories
can last for years, even
secular growth trends in
the end have a limited
shelf life. and you see
the theme's age, there
are fewer and fewer plays that can make you money, last longer, but never just last
forever. years ago, back when the smartphone was a relatively
recent invention and most
people were using dumb
phones, i started talking
about the power of the
mobile internet tsunami, and for a while, there was a ton of money to be made over the
smartphone food chain as
people converted from
dumb phone to smartphone. but the tsunami turned out to be the reason to buy best of breed
players like apple. it turned out not to be a license to buy the weakest
players which gradually fell
by the wayside as we
learned. a rising tide
does not lift all ships. the ones with holes in this sink even with great secular trends.
here's the bottom line, most
of the time you can hang
on to a stock for years
and years and years, but
if you find a growth story that's been pushing ul a whole foods or apple, then
there's nothing wrong
with owning them until
the story stays
intact. it can be a very
long time. but just like
life, even secular growth
stocks don't last forever. and while you may want to go for the greatest secular surf ride
of all time, even the
biggest wave ends up
crashing on the shore. only homework will keep you from crashing along with it. larry in tennessee, please,
larry? caller: is this james j. cramer? yes, it is, how are you? caller: great, man, i think
i've read everything you
wrote since 1998.
i want to thank you for
helping me put my
daughter through college
and teaching us home gamers to survive on this stuff. you're terrific, thank you so
much, thank you. caller: so i had a question,
tax season's coming up and
you teach us to trade
around the core positions
up and down. i wonder if
you have any advice for
us coping with wash sales. they're a problem and really, that's why what i'm going to do
on that problem. i can't give individual tax
advice, you've got to speak
to your tax consultant
about when you can take
these sales and then go
back and buy because you're absolutely right. there can be a wash sale problem. but i don't want to speak broadly about it because that's
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