Dipy,
2 problems with your reasoning:
1 - If the next 20 years were a great bull market, then it's LESS surprising that the companies didn't beat the averages. If these 34 companies were already hot in '80, when the overall market was cool, then an extended bull market obviously would help other companies more than these 34.
2 - If these 34 stocks were already hot at the beginning of '80, that's because many people were buying them BEFORE the start of 1980. So it's reasonable to assume that a long-time holder of the stock would have a lower cost-basis than that used for 1-1-80, hence a higher long term average return.
The other possible problem comes from the article itself. How did he define "hottest"? Based on underlying fundamentals, or just stock price? And over what time period (1 month, 1 year, 2-3 years). If the criteria was based mostly on stock price, and over less than a 1 year period, then it's a flawed study to begin with, because it was just looking at a bunch of hot mo-mos, which, as we all know, change constantly. If it was based on companies that had demonstrated a serious ability to grow earnings and cash flow over a 2-3 year period, then I would truly be surprised.
Depending on these criteria, the study is either earth-shattering, or utterly meaningless.
Let us know if you find out how the companies were chosen.
Bob |
