Revolutions and Rule Breakers
By David Gardner
Wherever there is revolution, there will my investment dollars be.
-- David Gardner
fool.com
a paragraph from the article:
"In fact, even a Rule Breaker investor's winners are not always easy to hold, no worries, blindly, without noticing. (That's an approach we would never advocate. We believe in buying to hold -- we do not believe in buying blindly and automatically holding forever.)
America Online was one example for us. Observers look today at our gaudy five-year-return on the stock of 18,000% and some discount that, saying, "That was easy. America Online, of course, sure. But what would the portfolio look like WITHOUT America Online?" That last, generally said with a smile. (Here was one answer, by the way, last time we checked.)
Not only is this akin to asking how the Bulls would have done without Michael Jordan, but it also fails to respect the patience and value of holding. The wag's question implies that it was easy and automatic to see one's way to holding AOL all these years.
Really? In fact, the stock dropped 75% in the summer of 1996. And it's been cut in half more than once in just the past few years, having regularly seen declines of 25% or more. At every one of those points you had a combination of media entities printing headlines calling the company "America Offline" and a bunch of professionals, Wall Street brokerage firms, market timers, media types, saying America Online was going down, America Online was overvalued, America Online was going to get crushed by Microsoft, et cetera, et cetera.
I would love to find out among AOL's total outstanding share count of 2.2 billion how many shares have actually been held for five years. Or how about three, even? Outside of those held by company employees, I would guess less than 1%.
It isn't as easy as it looks to hold great stocks -- so many people are tempted to sell what is greatly profitable, or dump what is temporarily out of favor.
Let's stay on Rule Breaking, and return to today's epigraph: Wherever there is revolution, there will my investment dollars be. Do you invest this way?
You need not. Rule Breaker investing is, as I have so frequently written in the past, for a rather small minority of investors who (1) have the knowledge and interest, (2) can accept large amounts of risk, and (3) have a long time horizon. Breaker investing is especially for investors who actively look to learn from their mistakes. This will not be everybody. Perhaps, not many at all." |
