A triumph of investing skill over market panic


Sharemarkets are volatile, but there are some big gains to be had, as in the case of Industrea Limited (ASX: IDL), writes The Motley Fool

Shares are down, again, with Greece dragging markets lower. The Greeks are heading back to the polls, raising the prospect of political uncertainty for weeks to come.

We remain relatively sanguine about the whole European affair. It’s no use worrying about the unknown — instead, we simply focus on searching for good stocks trading at cheap prices.

More on this a little further down…

Doubts, fear, panic, loss…
Watching your investments fall in value is rarely a pleasant experience.

Doubt sets in.

Did we make a mistake?

What does the market know that we don’t?

Fear sets in.

Should I sell out now, before it’s too late?

Should I have set a stop loss?

What the hell is going on?

Not revolutionary…just sensible, and profitable
The Motley Fool way of investing — focusing on the company, and not the day-to-day movements of the share price — is hardly revolutionary. It’s a time-tested strategy, used by Warren Buffett, our own Gardner brothers, and other great investors.

But even still, we find many people letting their emotions rule their investing decisions.

We recognise that stocks will move up or down for a variety of reasons — and often these movements happen daily.

But if you manage your temperament and don’t let your emotions affect your investing decisions, it’s highly likely you’ll decrease your stress levels and simultaneously increase your long-term investing returns.

Falling, falling…then a takeover
One of our recent Motley Fool Share Advisor stock recommendations is Industrea Limited. Like many other companies, in recent times its share price had fallen around 20%.

Then, out of the blue, U.S giant General Electric (NYSE: GE) unveiled a minimum $1.27 per share cash offer to takeover the entire company. Instantly, Industrea’s shares soared 44% higher.

We suspected Industrea was one of those stocks that might have been thrown out with the bath water. Turns out we were right.

And the story may not be over.

Industrea shares are trading today at around $1.25.

There is the potential for higher return from the separate sale of mining services division.

And there’s the potential for a competing bid.

And of course, on the downside, there’s the potential the bid could fall through, although that seems unlikely.

The thrill of victory, and of the process
Of course we’re thrilled the Industrea recommendation worked out so well.

We’re thrilled so many of our members should be able to lock in a good profit in a short space of time.

But more to the point, we’re thrilled the Motley Fool investing process has been validated.

In investing, as with most endeavours, if you get the process right, the outcome will often follow.

We identified Industrea as a company with “turbo-charged potential…so cheap that the downside is limited, while the upside is sky-high.”

The process was right. Our expected outcome followed. There may have been a little luck involved, but we figure you make your own luck, especially if the process was right.

We might have preferred to keep Industrea on our Motley Fool Share Advisor scorecard for the long-term, but we’re thrilled GE recognised the value. We’re not greedy, and are happy with the outcome.

And Finally…
Remember, when markets are volatile, when stocks in general are being taken to the wool-shed, many indiscriminately so, the Industrea story is a telling reminder of the importance of focusing on the business, and not the share price.

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The Motley Fool‘s purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691).

 

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