Just to add my 2 cents as someone who has himself and his entire family 100% in G&K stocks and has played the GG 100% except for a few forays into options. I have come to the conclusion that LTB&H is great during bull markets and that cashing out or buying and selling is great in Bear markets.
I'm going to do a littly poxy-pooh on that theory. Taxes and trying to get that perfect timing will help eat it alive over the longer term and destroy the power of compounding. It's easy to climb on board the trading wagon after the October 1998 to October 2000 period or the 1995 to 2000 period we have just gone through and say trading is "the way to go". However, those two periods are short events. There are investors on this board that held shares of Cisco, Microsoft, Oracle, Intel and others before those time periods. What we are trying to accomplish is a portfolio of investments using criteria that is a longer term strategy in high technology investing. Maybe the lure of Silverback growing at 15 - 23% per year is not going to win you quick doubles and triples, but over time it can build a lot of wealth. As the gorillas and kings mature, we simply continue our hunting and add shares of younger promising ones like a Siebel (to use as an example) for some higher growth companies. It, too, will mature and another young company will come along.
You've got to look at the power of compounding. Whether you back to the IPO days of the gorillas we know, or use a point in time one year, two years, three years, four years, five years or more beyond their IPO's - look at the returns of Cisco, Oracle, Intel, Microsoft, Siebel, Sun, EMC, Network Appliance, i2, Qualcomm, etc... from each vantage point.
Using the closing price on the first trading day of each year, what's Cisco look like for those that bought and held using the current price of 54 1/2?
Here's the chart and it shows that one share purchased near the beginning has grown into 288 shares.
finance.yahoo.com
Cisco 1990 to present = 64,627%
Cisco 1991 to present = 35,779%
Cisco 1992 to present = 11,836%
Cisco 1993 to present = 4,931%
Cisco 1994 to present = 2,954%
Cisco 1995 to present = 2,775%
Cisco 1996 to present = 1,184%
Cisco 1997 to present = 680%
Cisco 1998 to present = 463%
Cisco 1999 to present = 129%
Cisco 2000 to present = 1%+
I could have gone through many of the G&K stocks to illustrate the power of compounding that longer term holding provides over the years. Intel over the past 30 years. Oracle. Microsoft. EMC. Sun Microsystems. Obviously, one could always come up with dates and prices of these equities in the past to show some data that trading might have worked, but in general that's not our long term goal of trying to trade in and out at what might appear appropriate times.
However if you are like most of us then you need to ask yourself yourself how many years of bear markets have there been vs bull market and which one has won out over the history of the market, obviously the bull.
I posted the information before, but this is something I shared in a Fool seminar this year:
"Why you should forget timing, use a buy'n'hold strategy."
[In his classic, "How To Make Money In The Stock Market," William O'Neil, publisher of Investors Business Daily, says: "During the last 50 years, we have had 12 bull markets and 11 bear markets. But guess what? The bull markets averaged going up about 100 percent and the bear markets, on the average, declined 25 percent to 30 percent. Not only that, the typical Bull market lasted 3.75 years and the classic Bear market lingered only nine months. Every single time the market recovered and ultimately soared into new high ground." Get it?]
I don't want to offend anyone because I know we all use a variety of strategies that meet our comfort level. Yet, a solid portfolio of companies growing their earnings and revenues throughout the years will reward the patient investor. The G&K index is up 34% at the moment YTD. Boy, you can create a lot of wealth over time at that kind of return. A lot of wealth. The return on the Index was not achieved by trading this year. Even though at the end of this year via our portfolio survey that list might get altered, I would suggest we keep it in the database to see what it looks like one, two, three, four, five, six and more years from now with the stocks in it. We're trying to build a strategy and mix of investments in our portfolios that will allow us to reach our goals.
BB |
