Without Caps, I submit that LTB&H is a solid strategy. If you wanna wait for some of these gems to get out of the doldrums, then do so, but I hope they're the right ones.
However, many in this downdraft have seen their profits evaporate on NT in 3 weeks. It took over a year to build them.
If you did your LTB&H thinking with a NT investment 1 year ago, what do you have to show for your 1 year of LTB&H?
Not much.
I concur that if you couple ANYTHING with a disciplined valuation methodology, you'll win. However you fail to take into account that valuation is not constant and certainly not always positive.
NT, AMCC and plenty of other stocks were valued (fairly??) much higher. Now they're not. The shifting valuation metrics of Wall Street dictate that the growth differential has mitigated enough to warrant a lower valuation.
So down they come. If you bought ANYTIME this year, you're most likely underwater. So, with your premise, take your disciplined model and use it when the model says NT is valued higher because their growth is accelerating.
You buy.
You hold.
Then they (and WS big money....) say the growth is slowing.
You hold.
You're losing.
So now....you gotta wait until WS re-values your NT stock with the same metric it did when you bought it?
How long's that gonna take? 2 years? 5 years? 10 years?
I don't know. In Internet time (which is sorta how we live these days....), that's eternity.
And what if you're wrong and it NEVER comes back? There will be plenty of LT losses on Schedule D's these days (just ask the internet players......). Ask the CMGI players that swore that CMGI was the stock to LTB&H for 5 years. A slam dunk, an internet powerhouse, a "gotta have" stock.
Just for the record, I don't think all the optic plays will go the way of the internet stocks.
But some will. Make sure your LTB&H candidates aren't some of those. If they are, then LTB&H doesn't work.
Steve |
