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Assassin or Hunter: These 3 Stocks Are Right for You

01/28/2016 10:18 am EST


Michael Berger

President & Founder,

Citing an article written by Lee Freeman-Shor, Michael Berger of examines the investing analogy of being a hunter versus being an assassin and explains why he favors a hybrid approach. Michael also offers a trio of stocks on his radar for investors to consider.

The Federal Reserve left interest rates unchanged and plans to raise rates at a “gradual” pace. Specifically, they will monitor how the United States is impacted by volatility in the global market. After the December rate hike, global financial markets started to sell-off and China continued to devalue its currency. These factors, coupled with weak commodity prices have left investors searching for shelter.

We recently came across an article that we find relevant for today’s markets. The article was written by Lee Freeman-Shor, a Fund Manager at Old Mutual Global Investors. The article is titled “Being Wrong and Still Making Money.” In the article Shor said:

“When losing, the successful investors I worked with planned to become either Assassins or Hunters. Assassins sold losing investments that fell by a certain percentage or that declined by any amount and showed no signs of recovery after a certain period of time. Hunters invested a lesser amount at the outset and with a plan of buying significantly more shares if the price fell. Hunters were also unafraid to sell if it became clear that they had made a mistake. The bad investors didn’t have a plan and consequently turned into Rabbits. When losing money, Rabbits neither bought more shares nor sold their holdings. Once forming an initial perception, Rabbits were achingly slow to change their opinion of a stock. Which tribe will you become a member of?”

Be a Hybrid, an “Asster”

Although we do not think any specific tribe is wrong, we think the best combination is a mix of an Assassin and Hunter. We are firm believers in dollar cost averaging which is why we are better suited for the Hunter tribe, but we also believe accepting losses is a critical aspect to being a successful investor.

Recent market weakness has created several investment opportunities for Hunters and we want to highlight three stocks on our radar.

Applied Optoelectronics, Inc. (AAOI) offers investors exposure to favorable data trends in data center spending. The new 100G product will help AAOI diversify its customer base while improving margins. Although the data center optics market is very competitive, AAOI has fallen more than 25% since late October and we see upside to current levels.

Bank of the Ozarks, Inc. (OZRK) is one of the fastest growing and most efficient banks from a profitability standpoint. OZRK removed a major overhang after they acquired two banks that brought the company over the $10 billion asset threshold. We see upside to current Wall Street estimates after the removal of this overhang. Since early December, OZRK has seen its share price fall more than 20%. We think the recent pullback in bank stocks has created an opportunity to buy a best-in-class company trading at a discount.

Palo Alto Networks, Inc. (PANW) has fallen more than 25% since December 8 and shares are trading in oversold territory. PANW specializes in multi-function next generation firewall appliances which can replace several point solutions with one standalone appliance. During 2015, PANW saw a significant increase in the number of customers using its Wildfire solution (over 8,000 paying customers). We expect to see PANW announce another beat-and-raise quarter after the launch of its Autofocus and Aperture. Recent cyber-attacks have led to an increase in demand for data security and we expect such demand to continue to increase for years to come.

Michael Berger, Founder and President,

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