Make This Your Best Investing Year Yet

By Tim Beyers

updated 3:30 a.m. ET May 8, 2008

"In our view, American capitalism is resilient and mostly free, and has created the most powerful economy the world has ever known. So long as we protect and nurture it, its stocks will continue to rise more than they fall."

Those were the words of Fool co-founders David and Tom Gardner in the opening issue of Motley Fool Stock Advisor in April 2002. Months of losses would follow. Despite picking good companies, there were some notable losers in the first six months of the service:

Tom and David weren't the only ones losing. Stocks performed awfully in 2002 as the nation struggled to recover from the 9/11 terror attacks and pull itself out of recession. Here's a sampling of the notable headlines from the financial pages in early 2002:

• "Much-Hoped For Stock Market Rally Stalls in January," Jan. 29, 2002, Dallas Morning News
• "Why Wall Street Isn't Flying Higher," May 6, 2002, Christian Science Monitor
• "Effects of 1929 Market Crash Were Not as Broad as Today's," July 28, 2002, Worcester Telegram & Gazette

Almost everyone was depressed. Even Berkshire Hathaway chairman Warren Buffett offered cautious optimism in his 2001 shareholder's letter, released in February 2002:

[Partner] Charlie [Munger] and I believe that American business will do fine over time but think that today's equity prices presage only moderate returns for investors. The market outperformed business for a very long period, and that phenomenon had to end. A market that no more than parallels business progress, however, is likely to leave many investors disappointed, particularly those relatively new to the game. [Emphasis added.]

As the calendar turns ...
Fast-forward to 2003. Buffett and Munger -- shockingly -- had it wrong. 2003 was an excellent year for stocks -- the Vanguard 500 Index returned more than 28% -- as a recovery ensued. And some of the best investors profited handsomely. Notable winners:

• Ken Heebner, whose CGM Focus (CGMFX) fund returned 66.5%. Today, he's investing in ArcelorMittal (NYSE: MT) and Transocean (NYSE: RIG).
• Glenn Fogle, whose American Century Vista (TWCVX) fund was up 42.8%. Today, he's buying shares of BioMarin Pharmaceutical (Nasdaq: BMRN).
• Steve Wymer, whose Fidelity Growth Company (FDGRX) fund zoomed north by 41.4%. Today, he's investing in VMWare (NYSE: VMW) and Red Hat.

Fast-forward another five years. Evidence abounds that, for investors, it's going to get worse before it gets better. A sampling of recent headlines from the world's top news organizations:

• "Quarter Was a Bad One for Stocks, No Matter How You Look at It," Mar. 31, 2008, Dow Jones Business News
• "A Gathering Storm," Jan. 24, 2008, TIME
• "JPMorgan and Fed Move to Bail Out Bear Stearns," Mar. 14, 2008, New York Times

Once again, depressing. But remember back to 2002. That depressing year was a year to be buying stocks, not ignoring them. For David and Tom, those early picks turned into substantial winners, helping them beat the S&P 500 by nearly 40 percentage points on average.

When history repeats itself
As for what investors should do today, here's David (speaking for both him and Tom) in a recent issue of Stock Advisor:

My favorite living preacher, the now-retired Irishman Rev. Maurice Boyd, used to remind anyone who would listen that courage is not the lack of fear. We are all touched by fear: fear of death, fear of failure, fear of what a bear market can wreak upon our retirement portfolios. But courage is forging ahead, taking action, being productive despite the fear that we feel! And so I say to you: Courage, Fools.

The market is offering you the same wealth-creating opportunity it did when Stock Advisor began in 2002. So take advantage and buy the stocks today that will make this your best investing year yet.

If you need ideas and want to see what David and Tom are picking today, click here to join Stock Advisor free for 30 days. There is no obligation to subscribe.

Fool contributor Tim Beyers, like The Motley Fool, owned shares of Berkshire Hathaway at the time of publication. Berkshire is a Stock Advisor and Inside Value recommendation. BioMarin is a Rule Breakers pick. CGM Focus is a Champion Funds selection. Costco, Whole Foods, and Schwab are Stock Advisor recommendations. The Motley Fool's disclosure policy is timeless.

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