Big Moat Stocks

Last week was interesting in that I was sitting in a tire store to have a tire replaced on my car and I met someone who had an interesting rags to riches story. He was a general contractor who ended up broke and lost his homebuilding business because he couldn’t pay his creditors. Once this happened, many banks wouldn’t even open a checking account for him so he opened an account with an online broker with checkwriting privileges. After opening this account he started researching stock trading and purchasing options. After paper trading for six months, he began trading options. He’s now in his 40’s, semi-retired and was in the tire store to have new tires put on his car that he was giving to a single mother.

The most interesting thing from our conversation is the very first thing he told me when I asked him what strategy he used. His response was, “the trend is your friend“.

Apparently professional investors don’t remember this rule all the time either as this article from TheStreet.com points out. It says:

…MotherRock, a two-year-old fund that once had nearly $450 million in assets, shut its doors in late July after losing nearly half of its value. Led by former New York Mercantile Exchange President J. Robert “Bo” Collins, MotherRock also bet wrong on natural gas prices.

…MotherRock got caught betting that natural gas would fall at a time that the commodity was soaring to new heights. The irony is that if MotherRock could have held on for another few months, it might have recovered much of its losses.