June 29, 2011 - I have sold too many winning stocks too soon and kept too many losers too long. From this experience I have learned. One of the things I've finally figured out is that having a good stock is hard to find and that once I've found one, I should make sure to follow all the news, then decide whether I should keep it or let it go. I should ignore the day to day price fluctuations and focus on the long term prospects.

To qualify as a winning stock, a company must have increasing revenues, and preferably, earnings or at least very strong prospects for solid earnings quickly. The news must be mostly positive in almost every press release and conference call. There has to be a general upward trend in the stock price, allowing for normal volatility that comes from buying and selling among investors and traders.

Here's a recent example of a winning stock: Dendreon (DNDN). Revenues have increased since it began selling its drug for prostate cancer known as Provenge. Some analysts see this as a $1 billion drug. The only thing holding back sales is the fact that the company can't make enough of its treatment. It will open new facilities within the year, and they should adequately handle the pent up demand. The company is also working on applying its unique, human genome research to other cancers, hoping that what it learned from making Provenge will cross over to other drugs.

In short, the only problem this company really has is that it can't make enough of its product. That's a great problem. I started buying the stock at the $5 level and my last purchase was around $40. I believe this stock will continue to grow, in fits and starts, for a long time, unless there is news to tell me otherwise. Certainly there is competition now and more will come, but this stock is delivering on all its promises.

Do I recommend DNDN to you? No. But I do recommend you research the stock to see if it fits your risk tolerance. My tolerance for risk is very high. (I have owned many bio tech companies that are no longer open for business. I am hoping DNDN makes up for all of them.)

Some other stocks that have shown great winning streaks: IBM (IBM), Apple (AAPL), (after some terrible years when Jobs was gone), and Google (GOOG) come immediately to mind. They haven't gone straight up but over time, they delivered better revenues and earnings and ultimately higher stock prices to their investors. Owning one of these champions has made many investors very well off.

But it wasn't always easy holding on. When times were difficult and the stock took a beating, it was an extreme challenge to believe in management, to hold onto a stock that everyone else seemed to hate. Other stocks were going up while these were going down. But all of these stocks weathered their particular storms and came back stronger than ever. Investors who kept the faith got well rewarded for believing.

The challenge in investing is to find great stocks and then be patient. Patience is so very hard when the daily fluctuations of a stock's price can make you crazy, especially when the down days have no news to explain the latest gyration. But that's part of the nature of investing: mysterious moves that try your faith.

You can never know you have a real winner until the winning is over. Buying a stock that will turn into a winner is a challenge for all of us. But buying a stock that has demonstrated, through good and bad economic times, that it can increase sales and revenues is a great place to start. These stocks have already proven their winning ways, and unless there is a major, detrimental change, the odds are they will continue to do so. For investors who keep the faith, who truly believe in their stocks, the rewards can be bountiful.

Many pundits will tell you that times are different now. That buying and holding stocks is no longer the way to make money. Trading is the way to go.....(the way to go broke unless you have the discipline of Job). Nothing could be further from the truth. Buying and holding great stocks is what made Warren Buffett one of the wealthiest investors of all time. As Mr. Buffett puts it so eloquently: My favorite holding period is forever. That's keeping the faith.

- Ted Allrich