2007's Sure Thing: Profitable Opportunities

"The future has several names. For the weak, it is the impossible. For the fainthearted, it is the unknown. For the thoughtful and valiant, it is the ideal."

-- Victor Hugo

As we begin trading in 2007, the predictions about how things will unfold in the year ahead are coming hot and heavy. Many pundits confidently state that the economy is in good shape and that we shall see further market advances; others proclaim, with great gravitas, that there are many problems out there and further moves higher in the market are questionable at best.

The arguments and logic are always compelling and it seems downright ridiculous for us average market players to question prognosticators who obviously possess far superior intellects (even if they have never gotten it right previously).

Forget the predictions.

There really is only one thing we need to know about the market in the year ahead. Where ever it may end, it isn't going to arrive there in a straight line. If your investing plan is to simply buy today and hold for a year no matter what happens, then maybe those predictions about the future will matter. But that is an exercise in fortune telling, not market speculation. It is the journey along the way and how we manage it that will determine our ultimate gains and losses. We just need to enjoy the ride and the rest will take care of itself.

I'm always optimistic at the start of a new year not because I believe the market will go higher but because I'm confident that there will be a steady supply of money-making opportunities. The indices may actually have a lousy year but I'm absolutely certain there will be some great tradable rallies and some equally tradable pullbacks. Success depends on our efforts; it has nothing to do with the market itself.

2006 was a difficult year for many as leadership was primarily in groups that haven't led in many years. Big-cap value stocks like Coca-Cola and General Electric did well while growth like Intel did poorly. The Nasdaq was the laggard this year while the DJIA was a leader. If you didn't adjust to this change in leadership you probably had some difficulties.

2007 is likely to be equally challenging in terms of determining ultimate leadership. The great likelihood is that the best-performing groups and indices will turn out to be something that we really haven't considered at this point. The key is to stay flexible, keep an open mind, and when trends emerge to embrace them because they tend to persist longer than we think.

New year excitement is in the air and early indications are for a big open. It is hard not to be at least a little skeptical of that sort of early exuberance but seasonality favors the bulls and we should give them a little room to prove that this is something more than just emotions.

Overseas markets were up nicely yesterday but are mixed this morning. Oil is down again and gold turned negative after a positive start. There are a lot of analyst moves on the wires such as Lehman downgrading European stocks and Goldman downgrading chips, computer hardware and oil.

At the time of publication, De Porre had no positions in stocks mentioned, although holdings can change at any time.

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James "Rev Shark" DePorre is the founder and CEO of Shark Asset Management, an SEC-registered investment advisory firm. He also operates sharkinvesting.com, an interactive online community that serves and educates active investors. DePorre holds business and law degrees from the University of Michigan, is a member of the Michigan Bar Association and a former tax attorney and CPA. He lives in Anna Maria Island, Fla., with his wife and two children.Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Rev Shark appreciates your feedback; click here to send him an email.