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Louis Ehrenkrantz' 7 Golden Rules for Investing

GOLDEN INVESTING RULES

In nearly 40 years on Wall Street, the late Louis Ehrenkrantz, dean of American stock pickers, was known for his ability to predict social and political developments -- and identify companies that would benefit most from those events.

First rule: develop a large appetite for reading; it will hone your instincts for finding successful companies.

Second rule: don't overdiversify; ten stocks, in at least three sectors, are enough for the average investor.

Third rule: stick with your winners and sell your losers; do not automatically sell when a stock hits a target price, but continue to hold it as long as it performs well and has good prospects for the future.

Fourth rule: look for top-quality, out-of-favor companies; look for companies that produce an array of high-quality products and/or services.

Fifth rule: don't worry about earnings if a company makes a popular product; strong earnings growth will follow.

Sixth rule: don't tinker with your portfolio; check your portfolio's performance only once or twice a year.

Seventh rule: don't be afraid to hold cash; it's okay to be prepared to purchase stocks with beaten-down prices after a correction.

The great Ehrenkrantz's rules were published in a recent Bottom Line.

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UPDATE: August 16, 2005 7:01pm

A reader informs me that Mr. Ehrenkrantz passed away 6 years ago in 1999, and is no longer affiliated with the firm that still bears his name . .  .

Sunday, August 14, 2005 | 10:39 AM | Permalink | Comments (6) | TrackBack (0)
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Comments

Does the third rule and sixth rule conflict? If you only adjust your portfolio twice a year how are you supposed to get out of a clearly damaged stock a la KKD?

Posted by: brian | Aug 15, 2005 12:06:23 PM