Joel, you can draw those conclusions from what I said, but I still believe the best strategy for most investors was summed up by Warren Buffett, when he said he buys a stock to hold forever. What I think Buffett means is that you hold a stock if the overall business is good and if the management is excellent. You trust management to get through the tough periods and really make something of the more favorable periods.
Similarly, I hold a stock unless there are worrisome changes in the fundamentals, such as the prospect of a permanent decline in demand, the substitution of other products, the loss of capable management, etc. Demand for fossil fuels, particularly oil and gas, is relatively inelastic in the sense that, despite economic downturns, people still drive their cars and heat or air condition their homes. In hard times, they may put off buying more stuff, thereby resulting in lower demand for goods and services and correspondingly less demand for energy embedded in those products and services. But that's not enough change in fundamentals to warrant selling a well managed company.
An example from the technology sector is QUALCOMM, a stock that has dropped considerably over the last 18 months, from a high near 200 to its present level near 65, despite very encouraging news for its proprietary communications technology. QCOM is probably the best managed, most innovative telecommunications company in the world. Despite the unfavorable comments of many investment analysts, this stock in my book is not a sale. If anything, it is a cautious buy, and only a cautious buy because of unfavorable sentiment created by analysts, and also by competitors like Nokia. If somebody builds a better mousetrap, well that would constitute a fundamental change that might tempt me to sell the stock. Until then, I just hold it.
Art |
