A few things I’ve been reading this weekend…

  • IBD Makes the case for the stocks of ‘smaller, younger growth companies.’ (You already know that I’ve had my fill of IBD’s Kool-Aid on this topic.) They highlight 15 stocks in that article, some of which you’ve seen on my watchlists lately. The 15 are: IST, VLCCF, CME, GMR, SYNA, PLMO, ISRG, TNP, FMD, UTHR, BTU, BEBE, EBAY, BSTE, AND VRSN.

  • Bill Mann gives an important message when he says to beware of confirmation bias:

    But confirmation bias and its cousin, negative confirmation bias, are two dangerous components to investing. Confirmation bias is the investing equivalent of a full house in poker — you’ve got a great hand and you’re convinced that you’re going to win. But someone at the table keeps raising your bets. “Sucker,” you think. “I’m going to make this expensive for you.” Ah, but come time for the showdown, you’re in for a shock. You lose — to a higher full house.

    Confirmation bias is the human tendency to focus on news that confirms our biases, and ignore or reject any information that puts it into question. In the example above, you had great cards, and you focused on those cards and the eventual positive payoff. At no point did you consider that your opponent’s analysis, which went counter to your own interests, was somehow correct. Had you even thought about why your opponent might be acting rationally, you could have avoided big losses. But the reality of the situation was going to play itself out regardless — you were going to lose.

  • I haven’t read this one yet but Alex Wallenwein’s ‘Gold - and the US Savings Bomb’ article looks interesting.

  • Cliff Droke details why he sees parallels between the 1998 and 2004 markets. I especially like reason #5:

    The bears remained steadfastly bearish on the stock market even after the rally was underway in late ‘98 and many stubbornly remained bearish well into 1999 before turning bullish near the top of the rally that year. This pattern appears to be repeating itself to date this year. Consider these mass mailing solicitations from newsletter publishers in recent weeks: “Huge Crash Near?”, “The Great Multi-Year Bear Market in Stocks That Will Last for Years!”, “Urgent Warnings: The Total Destruction of the U.S. Housing Market is Coming…”, “Stocks are falling. The U.S. economy is teetering on the brink.”, “Forget the Great Depression and get ready for…The Greatest Depression.” With this much of a super-bearish psychological backdrop, a stock market crash is but a distant memory now and that all-important “wall of worry” that the market so loves to climb has been firmly established.

  • Duru’s been busy writing some new missives. First he has a follow-up on Intel. He also has a piece covering gold, oil, and the housing and retail sectors. And finally (man, he’s writing more than me!), in ‘The Madness of Markets‘ he looks at some nutty post-earnings/guidance moves in STT, FORM, OVTI and MCHP. (Duru’s been doing a lot of technical analysis of late. I think his transition to the Dark Side is almost complete. I’m so proud…)

  • A VC has some thoughts on where the money will be made in (and/or around) the blogosphere. (I love his eclectic taste in music. I’ll have to ping him when I do my best of Dr. Dre radio.blog later this week.) And he second’s my ‘emotion’ on Mr. Softie’s new blogging tool, MSN Spaces. And if Scoble, a Microsoft employee, isn’t gonna use Spaces and is recommending Movable (no ‘e’) Type and other platforms over Spaces, that should really tell you something!

  • This week’s Carnival of the Capitalists is up at The Entrepreneurial Mind.