This example reinforces the idea that thorough fundamental research should be part of every investment decision. Worried about the economy? Do some research before you avoid cheap cyclicals. Think energy prices are heading down? Before you short Exxon Mobil ( XOM), know what oil price is embedded currently in the stock. Think bond prices have to collapse? Understand the supply/demand dynamics for long-term treasuries before you trade the iShares Lehman 20-Year-Plus Treasury Bond Fund ( TLT).

Real wealth creation results from long-term investing, not sound-bite daytrading. And investment requires analysis, patience and conviction. Fundamental research is frequently complex and nuanced. Things are not always what they seem. At times they are, but fundamental events, both good and bad, could be already priced into a stock. Of course, at other times, fundamental conditions will change and so must your investment decisions.

Earning superior investment returns is not easy (unless, of course, you are flipping houses these days). The stock market is a complex beast. Shares represent ownership in a corporation, not ticker symbols in a financial video game. Businesses and industries are dynamic entities operating in a fluid economic and political environment. Investing should be challenging because its subject matter is. Successfully done, however, it is financially rewarding and a ton of fun!

So find a sound investment discipline that works for you and stick to it. I like to purchase undervalued stocks. Others prefer to buy great growth companies. There is more than one way to skin a cat but you always -- and I mean always -- must heed valuations. The easiest way to get skinned yourself is to flail around chasing sound bite after sound bite. If at the bottom of the next recession, you buy an expensive food stock because "you gotta eat," then my investor friend, you deserve to be lunch.

Eating What You Kill

As for some of my current favorite dishes, St. Paul Travelers ( STA) appears quite appealing. This large-cap value stock trades for 8 times profit and yields abut 2.5%. The major integration issues from the merger appear to be behind the company and I expect premium growth to resume in the second half. Ignore the "insurance cycle is peaking" sound bite for this very cheap, high-quality insurance franchise.

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