Re: Buying & Holding Oil Patch Stocks
Chuzzlewit, I follow Glassman, and so I too read his article about the superiority of a buy-and-hold strategy to the "churning" strategy.
The problem with Glassman -- and I insist it is a problem -- is that he is a fanatic about buy-and-hold, which means that, like all fanatics, he sometimes gives very bad advice.
For example, he advises readers to buy "good" companies, and not to sell them unless "the fundamentals" change. So far, so good. Then he goes on to say that you don't even need to look at your portfolio -- rather, you should not even look at it -- more than a few hours a month! Bitter experience has taught this investor that "the fundamentals" can take a nasty turn for the worse at the very time you aren't looking at your portfolio. In other words, slice it however you can, the fact is that you must spend a lot of time tracking your portfolio, whatever strategy you use.
Secondly, it is true that in the long term, buy & hold generally works out better than churning. But not everyone has a long term (20, 30 years) to look forward to; some of us, quite frankly, will be dead and in the ground a long time before our portfolio duds turn around. In such cases, carpe diem may be better advice.
Now we get to the oil patch. Here is the experience of one buy-and-holder.
Last fall, when the drillers/oil service stocks were No. #1, and prices were already high (and expected to go higher), I bought ESV and TDW. I still hold them. ESV is down 37.4% since purchase, 28.5% this year alone. TDW is even worse: down 37.4% since purchase, 32.8% this year alone.
Now, with these two stocks, the "fundamentals" have not really changed. What has changed is the environment -- oil prices, investors perceptions, etc., etc.
All that I am hoping for now is that the price the market is willing to pay for them will go back up to the level at which I bought them. First of all, I bought them at a high. Secondly, they are not likely to go much higher, in the light of possible downward revisions of long-term earnings forecasts. (According to the Value Line materials you kindly sent along, Chuzzlewit, ESV's forecast has already been revised downward.)
But some of the folks on this thread appear to have actually made some money this year -- by "churning," or, as they would phrase it, by rotating from company to company within the industry. It seems to me that, for people who really have a handle on the industry, and for people who are quicker on their feet than I am, this may be the superior strategy for now.
jbe |
