>> Their charts will snap back to their mean angle of ascent as soon as risk premiums become normalized again.
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If you take the 4 companies we used to think of as king of the hill in the internet world, AMZN, AOL, EBAY, YHOO. Since early 1999, The stocks have been mostly dead money. Yet their business revenue has been steadily going up. A buy and hold for these leader stocks would not have worked out, unless the buys were timed very well.
The point I want to make is this. These stocks went through an upward re-valuation in early 1999 (triggered by analysts). And perhaps their most optimistic outcome for the foreseeable future was baked into the price in Y99Q1. So basically the price matured all at once. Like the teenager next door who goes to adult height the year they turn 16, and don't grow an inch for the next seventy years.
So whereas the business is still in the process of maturing, the stock is priced at the most optimistic fully mature level. And even though revenues are growing, the stock responds not to that, but to the current mood on the street, or at the Fed, or the economy.
Buy and hold implies growing with the company. It implies share prices calibrated to the level of the business at each stage. Does buy and hold make sense in the "spurt" valuation regime that has ruled in the past year and a half ? Depending on where in a two month window you bought a stock, you could be looking at a seven figure gain or loss.
I think buy and hold makes sense for Caterpillar, Terex, Boing, etc.... But the volatile stocks ? |
