Article Highlights:
- HollyFrontier stock beat the S&P 500 Index by more than 55-to-1.
- It’s already up 32% since May 31.
- A similar trade I recently recommended is up more than 600% today.
Many of you have heard the saying: “Practice makes perfect.”
But has anyone ever told you it’s wrong?
Just going through the motions won’t make you perfect at anything you do.
You must practice well.
You must do things the right way.
Your practice must emulate the way you want to perform, say, in an important meeting or a big speech.
In middle school, there was a quote on the wall of our gym that added a twist to the saying:
Perfect practice makes perfect.
And my basketball coach, Mr. Herman, reminded me of it often in practice.
This applies to investing too.
There’s a certain type of company you should have in your portfolio.
The ones that practice — and execute — more perfectly than their competitors.
Let me show you a few of them today. One has outperformed the S&P 500 Index by more than 55-to-1…
Getting Rich From Liquid Soap
Apple Inc. (Nasdaq: AAPL) shares are up 1,900% since the start of 2009.
But I’ll bet you suspected as much.
Do you know the name of the company that supplies the liquid soap in many of the public restrooms you frequent?
It’s based in St. Paul, Minnesota. And it’s named Ecolab Inc. (NYSE: ECL).
Check out its stock chart:
I’ve told you about Ecolab before. Most recently, I wrote an essay about it last June.
It’s one of the best-run companies in the world.
How Do You Find Other Ecolabs?
Perfect practice makes perfect.
When you find a company that does things well, you find another thing: momentum.
In a seminal paper a quarter century ago, two professors told the world about the importance of momentum in stock prices.
Stocks that are doing well tend to continue to do well … and vice versa.
Shares of Apple and Ecolab stock are examples.
And there are others.
Salesforce.com Inc. (NYSE: CRM) was long hailed by Wall Street analysts and newsletter writers alike as too expensive:
But that didn’t stop it from rising.
Science and technology conglomerate Danaher Corp. (NYSE: DHR) is the stock that could, did and keeps on doing:
The Evolution of My Investing Mindset
Over the years, I’ve learned not to underestimate uptrends like these.
Sure, shares may fall back a bit.
But what if they don’t?
And even if you buy and they do fall a bit, you’ll still make money when they move higher.
I’ll speak about this at Banyan Hill’s Total Wealth Symposium in Amelia Island, Florida, on Saturday.
In that presentation, I’m going to share some of the things I’ve learned about momentum.
And the new strategy Jeff Yastine and I developed to take advantage of it.
(To hear my boots-on-the-ground experience while at the conference, make sure to follow me on Twitter.)
The last option trade we recommended while beta testing the strategy is up more than 600% today.
A Momentum-Based Recommendation for Today
I encourage you to consider momentum investing if you haven’t before.
When you do, I expect you’ll be surprised by the consistency of the upward moves of some of the world’s best companies.
And you’ll learn that some of that consistency may look a little inconsistent.
Here’s a stock you can consider that fits this description:
Since January 2000, oil refiner HollyFrontier Corp. (NYSE: HFC) has returned 11,100% to shareholders in capital gains and dividends.
That’s not a typo.
The S&P 500 has returned 200% over the same period.
But HollyFrontier’s returns haven’t been as consistent as Ecolab’s.
While its stock has trended higher, it has succumbed to downtrends. That’s just the nature of the energy business.
But this firm continues to execute as perfectly as it can.
Over the past two and a half years, it has grown its free cash flow by more than 10 times. It uses some of that cash to pay a 2.7% dividend yield.
And as you can see, its stock price has recently been weak.
But the firm has seen this before.
HollyFrontier Is Making Progress
Although shares bottomed at $5.51 in November 2008, they jumped to $58 less than five years later.
Then they did it again in July 2016, falling to $22 before nearly tripling in two years.
Today, I think they’ve bottomed again. It happened when shares fell below $40 this past June, to be precise.
That’s what management suggests too.
It has been taking advantage of the lower prices to buy back shares. It repurchased $267 million in the first half of this year alone.
That’s the most shares it has bought back in more than three years.
In addition, I track the momentum of the S&P 500’s 11 sectors. Energy has been at or near the bottom of those rankings for more than a month.
But that’s starting to change.
As of this past Friday, energy was ranked eighth of the 11 sectors.
That’s progress.
We can see the progress in HollyFrontier shares, too. They’re up 32% from their May 31 low.
I suggest you learn more about this stock. Consider picking up some shares before their momentum carries them even higher.
Good investing,
Brian Christopher
Editor, Insider Profit Trader