Motley Fool: Black diamond in the rough

Summer might not seem like the best time to think about investing in a ski resort operator, but Vail Resorts (NYSE: MTN) is offering would-be shareholders an enticing opportunity. The company has an impressive portfolio of 40 ski properties across the U.S., Canada and Australia, having made serial acquisitions to boost its exposure to key areas like the Northeast.

As you’d expect, Vail gets much of its revenue from sales of lift tickets and season passes, along with equipment rentals, ski and snowboard lessons, dining facilities and on-premises retail operations. In her previous role as chief marketing officer, newly appointed CEO Kirsten Lynch helped bolster sales of season passes, with the vaunted Epic Pass becoming ever more valuable as Vail’s acquisitions extended the range of resorts that passholders can visit. Season pass sales cushion the blow from adverse weather, making the business a more reliable generator of revenue and profit.

Vail’s stock performed well in 2021. Still, worries about an economic slowdown and lingering pandemic-related impacts on travel have pushed shares down more than 30% in 2022. With a dividend yield recently over 3.6%, Vail Resorts’ stock offers income and growth potential. It could well be a black diamond in the rough for investors. (The Motley Fool owns shares of and has recommended Vail Resorts.)

Ask the Fool

Q. If I want to invest in some stocks, is there a best day or week or month in which to buy them? – H.Y., Norwalk, Connecticut

A. That’s a market-timing mindset, which won’t serve you well.

For better results, go about it this way: Whenever you’re ready, you might just start investing regular amounts into a low-fee, broad-market index fund, such as one that tracks the S&P 500. Don’t worry about what the market is doing – just keep investing, preferably for many years.

If you want more control over things and want to aim for above-average returns, learn how to study and evaluate companies and their stocks, and aim to buy into healthy and growing businesses when their shares seem undervalued or reasonably valued. (Undervalued shares offer you a margin of safety.) Then plan to hang on for years, as long as they still have promising growth prospects. Whenever you find a great company selling at a good or great price, that’s the best time to buy.

And by the way, when the overall stock market has dropped sharply, as it has recently done, it will be much easier to find tantalizing bargains.

Q. What are “balanced” mutual funds? – T.S., Elyria, Ohio

A. Many mutual funds invest mostly in stocks, and other mutual funds focus mostly on bonds. Balanced mutual funds, sometimes called multiasset or mixed-asset funds, offer a mix of both stocks and bonds, split according to a specific allocation.

These funds, therefore, can be a bit more stable than single-focus funds; ideally, they deliver income (from bond interest and some stock dividends) and growth (from stocks). Many fund families offer balanced funds, with varying asset mixes.

My dumbest investment

I have three top blunders: I bought shares of General Electric at $39.75 per share, and dollar-cost averaged down to a $60,000-plus loss. I sold 1,550 shares of Microsoft at $35 apiece – they’re now at $266. I bought into Amazon.com at $306 per share and sold at $550 because you shouldn’t be able to make money this fast.

I’ve made a new rule for myself: If a stock falls 20%, I sell. If it rises 100%, I sell half and let the rest ride. – R.Z., online

The Fool responds: Your new rule can save you from losing large sums – but it might limit your gains, too. Many great stocks have fallen much more than 20%, only to rebound later and keep growing. Shares of Starbucks, for example, dropped by more than 80% between 2006 and 2008, to the single digits (on a split-adjusted basis). They were recently at $79 per share – and that’s after a 37% drop from their high last summer.

Consider making your new rule a bit less rigid. If a stock falls by 20%, dig into why it has fallen. If the company is still healthy and performing well, consider hanging on.

If you’ve lost faith in it, sell. If an investment doubles and you expect further growth, consider selling a small portion of it – or, if you’re shooting for maximum gains, none at all.

At a minimum, do some research and thinking before acting on your rule.