Tonight I was reading through USA Today's supplement, where their "Pros," the super stars of analysts, make their predictions for 1999. This was the funds issue, not stocks, but it is still informative, because they carried what their gurus in 97 picked for 98. The top funds the gurus picked returned the following: -6.9%, -2.9%, -28.3%, -11.9%, 8.7%, -5.8%, -15%, 4.2%, 16.1%, 3.3%, 16.5%, and 0.6%. This in a year when the average stock fund was up 7.3% and the S&P 500 is up 21.8%. Then when I looked at the 15 most widely held stocks, they are up for the year typically 30% to 60%, even as high as 107% for MSFT. AOL is not even on that list, and it is up several 100% for the year. Moral: Listen to the gurus, but don't follow them blindly, and don't try to fight the big MOmentum. If a stock has been a winner for a while, there is probably a very good reason for that, and unless something changes fundamentally, it will continue winning.
I do agree with you, though, about shedding a stock quickly following a negative earnings report, especially a high flyer. The other side of that coin, though, is not shedding one if it goes down because of a general market slide, without something going wrong with the specific company. I have gotten killed that way, getting stopped out of AOL, for example, at 80 (pre-split), when it dipped from 95 or so, only to bottom out at 79 1/2 and run up from there. Didn't get back in until 95 or so (pre-split). |
