As always, there is no shortage of bad news. These days the list is longer and scarier than usual. International hot spots, lack of leadership in Washington (what’s new here?), now Ebola!! I will stop here. As an investor, you need to learn to filter the news and the headlines- learn to read and listen, but always be on the lookout for what is going right and who is excelling. Finding the right industries, and the leaders in those industries is the key to successful investing.

Warren Buffet likes to joke about economic forecasting and analysis. He said if you spend an hour per year thinking about the economy, you probably wasted 59 minutes. Through a dozen recessions, Buffet profited by focusing on a few exceptional opportunities that meet his strict risk/reward calculations. By focusing at the company level, Buffet was able to navigate though all kinds of economic conditions and international events while tuning out the short term noise. While Buffet’s patience is certainly greater than most other investors’, if you can maintain the same focus on individual companies you probably will improve your investment results.

Right now there are a few industries that are in full blast bull markets. In these sectors- energy, biotechnology, solar energy, large cap technology, and several sub-sectors benefiting from the boom in natural gas- new millionaires and billionaires are being minted daily. Tremendous amounts of money has been made in the leading companies in these sectors over the last several years, while sadly some worry warts are sitting on the sideline. By focusing on what is going right now, and isolating the true leaders, your emotions are held in check and your profits accumulate.

Why is it that so many smart individuals make such poor investors? We have all heard the expression “a little bit of knowledge can be dangerous”. Too many investors spend too much time thinking and reading about the economy and do not realize the lag between the market and the macro economic conditions. When conditions look great and the mood is generally optimistic, people get fully invested and good values are hard to find. Conversely, when the economic news is awful and people are pessimistic like now, better valuations create opportunities to profit.  “You pay a dear price for a rosy scenario” and “You need to but when there is blood in the streets” are two age old quotes that come to mind.

In addition to trying to figure out “what’s next?” it is critical to know what is. Trends can stay in place for long periods of time or have quick traps and reversals. It is up to the investor to recognize the trends and not ignore or fight them. I utilize The Magnet® Stock Selection System, which simply researches and screens all public companies looking for “earnings momentum”. When companies can produce free cash flow in excess of market perception they will continue to attract new capital. Often times, when a large number of companies in one or sectors rank highly on our model, a certain story develops in the market to even accelerate the momentum of these “Magnets”.

Having been in the market for so long and seeing cycles come and go, I stress the need to stay on top of your investments. Despite believing that certain trends are firmly in place, by carefully following certain balance sheet and financial data I do constant diagnostic checkups on our portfolio holdings. While market leading companies gain the attention of investors, they are also being watched and copied by their competitors. To simply believe that a company can continue to earn higher margins than their competitors and maintain market share over time is to ignore history. Some may survive generations while others flame out more quickly.

The tough part for many investors is that market leadership invariably changes in each new bull market leg up. It is not enough to decide to own stocks, you need to identify the right ones. With today’s low interest rates, you cannot achieve long term financial goals in fixed income securities.  Nor can you generate high returns by being overly diversified. By focusing on current industry leaders you can tune out the noise of the market and maintain a healthy attitude- and portfolio.