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Technology Stocks : Lucent Technologies (LU)
LU 2.850+0.4%9:42 AM EST
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To: MRE who wrote ()11/15/1999 1:50:00 PM
From: John Malloy  Read Replies (2) of 21876
 
Be careful if you intend to follow Warren Buffett's "Buy-and-Hold" strategy and hold on to Lucent for the long pull. "Buy-and-Hold" can be a disaster. If "Buy-and-Hold" works, a stock should be worth more the longer you hold it. I worked out an example for Microsoft which shows that Microsoft is worth more the longer you hold it, but only up to an investment period of two years. Microsoft's value peaks at two years, and then declines at longer investment periods. Beyond two years Microsoft is worth less the longer you hold it. That means "Buy-and-Hold" fails.

Failure results from forecasting that the firm's growth rate and price/book ratio cannot be maintained at today's high levels forever. Eventually, both must fall. Lucent and other growth stocks are no different. Their high growth rates and price/book ratios must also fall eventually. "Buy-and-Hold" will also fail for them. See analyticalbooks.com for details.

John Malloy
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