To succeed at investing is not as difficult as it may seem.In fact, the common "buy low, sell high" wisdom might actually be preventing you from reaping the full potential of the best companies in your portfolio.
The best investors generally adhere to a few basic principles to outperform the market and generate life-changing returns. At The Motley Fool, co-founders Tom and David Gardner have been successful both by identifying companies with sustainable competitive advantages and by buying and holding stocks for the long term -- which eliminates the need to show consistently positive results on a quarterly basis.
Image source: The Motley Fool
One of the Gardners' key investing philosophies is that investors should add to their best-performing holdings rather than trim them. This may sound counterintuitive since conventional investing strategy teaches investors to rebalance their portfolios by trimming positions in winners and adding exposure to underperforming sectors.
Successful businesses tend to succeed for a reason. Therefore, stock market winners are more likely to continue to win. When Motley Fool investing services such as Motley FoolStock AdvisorandMotley Fool Rule Breakersre-recommend buying a stock, it's called a "double down buy alert."
What is it?
What does a double down buy alert indicate?
The double down buy alert indicates that a Motley Fool investing service is recommending a stock for the second or even third time. This is a sign that the analysts are so bullish about the stock's future that they suggest buying it again, even at a higher price, essentially encouraging investors to double their holdings of the stock. The double-down signal often indicates that the stock is one of The Motley Fool's top stock picks, but the alert is distinct from others like The Motley Fool's ultimate buy alerts, which are issued when both Tom and David Gardner recommend the same stock.
The Motley Fool has recommended doubling down on only a few stocks, so the alert is one of the strongest confidence signals investors can receive. Among past recipients of double down buy alerts are Amazon (AMZN 0.58%), Netflix (NFLX 1.73%), andTesla (TSLA 1.5%) -- all companies with stock prices that have skyrocketed over their histories.
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Strategy
Double-down stock trading strategy
There are a number of benefits to the double-down trading strategy. First, the best stock to buy is often one you already own. While it's important to diversify your portfolioby owning at least 15-20 stocks, the stocks you already own tend to be the ones that you understand the best. Therefore, you can more easily capitalize on opportunities that arise when the stock is unusually cheap or when it loses value due to short-term reasons like simply missing earnings estimates.
The other reason why the double-down stock-buying strategy works is because winners tend to keep winning. While it may be tempting to add to your losers with the hope that they'll gain substantial value, you're better off selling your losers and reallocating that money to your winners. Past performance isn't a perfect indicator of future growth, but it's one of the most reliable signals available. Companies that outperform generally do so because they are better managed, can create and retain competitive advantages, and are implementing disruptive strategies.
How to take action
How to take action on The Motley Fool double-down stock yourself
When The Motley Fool issues a double down buy alert, our analysts are encouraging investors to buy more of the stock, assuming they purchased it the first time it was recommended. While you don't have to double your ownership of the stock, historically it's proven profitable to add to your portfolio additional shares of the recommended company. A double down buy alert doesn't necessarily mean that the stock is expected to double in price, although there's a good chance it will, especially since Stock Advisor tends to issue double down alerts for only the most promising growth stocks in the market.
The Motley Fool encourages investors to take control of their own portfolios, so you'll have to make the decision for yourself whether to buy the doubly recommended stock and also decide how much of the stock to buy. However, the track record of Stock Advisoris clear. The investment advisory service has outperformed the S&P 500 (SNPINDEX:^GSPC) by a factor of nearly five since its founding in 2002. In other words, history shows that when The Motley Fool gives a double down buy alert, it's probably a good idea to follow that advice.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool has positions in and recommends Amazon, Netflix, and Tesla. The Motley Fool has a disclosure policy.
FAQs
"Double down buy alerts" from The Motley Fool signal strong confidence in a stock, urging investors to increase their holdings.
What stock is The Motley Fool talking about? ›
SoFi Technologies
SoFi is attracting billions in customer deposits, and that is lowering its cost of funding loans. Fool.com contributor Parkev Tatevosian elaborates on the core aspect of SoFi Technologies' (SOFI -1.53%) business model. *Stock prices used were the afternoon prices of May 18, 2024.
Does Motley Fool tell you when to buy and sell? ›
While a major component of the investing philosophy is to let winners run, they will send you an alert if they ever think it's time to sell. Worth noting: The Motley Fool doesn't try to time the market – the investing philosophy is to buy-and-hold through ups and downs in the market.
What are The Motley Fool 10 best stocks? ›
The Motley Fool has positions in and recommends Alphabet, Amazon, Chewy, Fiverr International, Fortinet, Nvidia, PayPal, Salesforce, and Uber Technologies. The Motley Fool recommends the following options: short June 2024 $67.50 calls on PayPal.
What does double down mean trading? ›
The "double down" strategy requires that you throw good money after bad in hopes that the stock will perform well.
What are Motley Fools rule breaker stocks? ›
The Motley Fool Rule Breakers newsletter focuses more on high-growth stocks in emerging or relatively new markets. The Motley Fool Stock Advisor service focuses more on growth stocks in established markets with lower volatility.
What are the best stocks to buy for beginners? ›
Compare the best stocks for beginners
| Company (Ticker) | Sector | Market Cap |
|---|
| Broadcom (AVGO) | Technology | $654.14B |
| JPMorgan Chase (JPM) | Financials | $561.64B |
| UnitedHealth (UNH) | Health care | $476.05B |
| Comcast (CMCSA) | Communication services | $153.48B |
2 more rowsThe 3–5–7 rule in trading is a risk management principle that suggests allocating a certain percentage of your trading capital to different trades based on their risk levels. Here's how it typically works: 3% Rule: This suggests risking no more than 3% of your trading capital on any single trade.
What is the Bogle method? ›
His approach to investing, as described in his book Common Sense on Mutual Funds, champions low-risk, long-term, low-cost funds. To achieve an acceptable level of risk in retirement portfolios, Bogle recommended that investors add bonds to their portfolios alongside stocks.
What is the best day of the week to buy stocks? ›
Timing the stock market is difficult, but understanding when to trade stocks can help your portfolio. The best time of day to buy stocks is usually in the morning, shortly after the market opens. Mondays and Fridays tend to be good days to trade stocks, while the middle of the week is less volatile.
Warren Buffett's stock purchases in the most recent quarter include Chubb Limited (CB) and Occidental Petroleum (OXY). HP Inc.
What stock will boom in 2024? ›
10 Best Growth Stocks to Buy for 2024
| Stock | Implied upside from April 25 close* |
|---|
| Alphabet Inc. (GOOG, GOOGL) | 12.2% |
| Meta Platforms Inc. (META) | 22.3% |
| JPMorgan Chase & Co. (JPM) | 11.2% |
| Tesla Inc. (TSLA) | 23.4% |
6 more rowsApr 26, 2024
We regularly see similar ads from the Motley Fool about “all in” buy alerts, sometimes also called “double down” or “five star” buys, and they're generally just the type of steady teaser pitch that they can send out all year, over and over with no updates, to recruit subscribers for their flagship Motley Fool Stock ...
Can you win money on double down? ›
Internet connection required to play. DoubleDown Casino is intended for players 21 yrs+ and does not offer “real money gambling” or an opportunity to win real money or prizes based on the outcome of play. Playing DoubleDown Casino does not imply future success at “real money gambling.”
When should you double down? ›
Doubling down is making a bet equal to your initial wager after being dealt your first 2 cards. You only get dealt 1 more card and cannot hit. Double down if your cards total 9, 10, or 11 without an ace. You can also double down if your cards total 16, 17, or 18 when you have an ace.
What is the double down rule? ›
What Does Double Down Mean in Blackjack? This is another excellent strategy question. On your original two cards, you can double your bet before the dealer gives you another card. You place another bet equal to the first. Then, the dealer will give you only one card The dealer settles all bets at the end of the hand.
What stocks are in Motley Fool's ownership portfolio? ›
Portfolio Holdings for Motley Fool Asset Management
| Company (Ticker) | Portfolio Weight | Change in Shares |
|---|
| Berkshire Hathaway Inc Cl B Ordinary Shares (BRK.B) | 3.6 | +325% |
| Microsoft Corp Ordinary Shares (MSFT) | 3.2 | +7% |
| Amazon Ordinary Shares (AMZN) | 3.1 | +4% |
| Apple Ordinary Shares (AAPL) | 2.7 | +7% |
65 more rowsNo, AMD stock is not a buy right now. AMD will need to form a new base in the right market conditions before setting another potential buy point.
Is Tesla a good stock to buy? ›
Tesla stock has retreated about 30% in 2024. However, since Tesla reported first quarter earnings and revenue on April 23, it has rallied and is finding support at its 50-day moving average, according to MarketSurge analysis. Tesla stock hit a 52-week low of 138.80 on April 22.
What is a good P/E ratio? ›
Typically, the average P/E ratio is around 20 to 25. Anything below that would be considered a good price-to-earnings ratio, whereas anything above that would be a worse P/E ratio. But it doesn't stop there, as different industries can have different average P/E ratios.
