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TheStreet Open House

How a 'Speculative' Stock Became the Investment of a Lifetime

NEW YORK ( TheStreet) -- Regardless of the stock, the majority of us participate in speculation when we make an investment. Some loose consensus of sentiment determines the degree to which one stock is more speculative than another.

You would be hard-pressed to find anybody willing to call McDonald's (MCD) a speculative stock, even when it hit $100. It's a heritage company that continues to grow and pays a stable dividend.

Since hitting a 52-week high of $102.22 early this year, MCD is off about 14%. If you bought at or near the top, you speculated and were wrong. Does that make it a speculative investment? Probably not. Stocks tend to go up and down. This pullback should not surprise us.

But, what if MCD continues to go down or merely stagnates? At that point, does it become speculative in the widely-accepted sense of the word? Many investors would argue that it does not. McDonald's has a history of executing a proven business model. It's a blue-chip. That's fine; however, on the ground, it's still speculative. And if MCD stops generating meaningful returns, outside of the dividend hedge, its blue-chip status means little. On paper, it's no different than keeping dead money in Sirius XM (SIRI) or going long a pharmaceutical that the FDA denies approval.

Pandora: No More Speculative Than McDonald's

If today, I was told I could only own one stock, I would select Pandora (P - Get Report). I would own it over MCD or any other name.

I am about to put my money where my mouth is. I'm getting set to go overweight the stock, turning it into the largest position in a portfolio that includes dividend payers in MCD's league, more aggressive dividend growth stocks, a non-dividend paying growth stock or two and more "speculative plays," ranging from Nokia (NOK) to Zynga (ZNGA).

For the sake of convention, I group Pandora with the Nokias and Zyngas of my portfolio. However, by the end of the month, it will take up about five to ten times more space in my account than any of the traditionally "speculative" names. And, at about a 10% weighting, it will be my biggest position by a small, but significant margin.

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