I'm not messing with JNPR. I got stopped out at 50 after buying it at around 55.
Btw
This confirms why I've always said "you've got to know when to sell them".
>The Washington Post
The share price of Lucent Technologies, the telecommunications company now fighting for survival, has fallen from $77 in December 1999 to $8.40 at the market's close Friday.
The plunge was not sudden. It came in clearly identifiable stages. Investors who wanted out had time to get out. Clearly, many did.
But many have not - hence, Lucent's continued presence on all the lists of the most widely held stocks in America.
I can't explain why we cling to a company while it's losing almost 90 percent of its value. But I have my theories.
• The company is too good to fail. Some investors can't believe it won't "come back" - as did IBM in the early '90s. They think it at least will be purchased or merged on some favorable basis.
• It's a lifer. They bought Lucent as the embodiment of the "buy and hold" stock, the one investment they could pass on to their children and grandchildren. It's hard to sever such a tie.
• Too much gain. Those who bought their first shares of Lucent early, perhaps when it was spun off from AT&T in 1996, ran up significant capital gains. Lucent closed at $7.23 on its first day of trading. Even as it plummeted, they retained those gains and were desperate to avoid the tax hit. (For this reason, I myself was too slow to sell, though I gradually overcame my desperation, selling all my 1,200 shares in chunks.)
• Too much loss. When the capital gains disappeared or diminished, as they have for even the earliest owners, they couldn't handle the thought of having given up all that profit by not selling earlier. They joined the "hoping for a comeback" school. They still can claim to have lost nothing.
For some, no doubt, it's a combination of all of the above. Or simply inexplicable.
Whatever the case, Lucent's plight is a reminder that no company, however successful, is immune from catastrophe. Dot-coms hold no monopoly on failure.
Indeed, a recent study by two McKinsey & Co. specialists, Richard Foster and Sarah Kaplan, projected that no more than one-third of corporations in today's Standard & Poor's 500-stock index will survive 25 more years.
Their estimate, recounted in their book "Creative Destruction," came from a study of 1,008 companies in 15 industries over 40 years.
Among other things, they found that of the companies making up the S&P 500 in 1957, only 74 remained on the list through 1997.
They found as well that only "newly emerging" companies outperformed the S&P 500 during that period, and only a handful of those outperformed it for more than a decade.
Real success, in terms of price appreciation, is short-lived.
Out of curiosity, I studied the Dow Jones industrial average.
Of the original dozen stocks in the first Dow average (1896), only General Electric and Laclede Gas exist today. The others were bought or absorbed or dissolved or broken up.
Of 30 blue chips in the expanded average in 1959, 17 exist independently today in a form remotely resembling what they were.
Among the fallen or acquired or submerged are Allied Chemical, American Can, Chrysler, General Foods, International Harvester, International Nickel, Johns-Manville, Swift, Union Carbide, United Aircraft, Westinghouse Electric and Woolworth.
People generally have an aversion to selling, financial writer Donald Cassidy says in an article in last month's AAII Journal (published by the American Association of Individual Investors).
It violates the "hold-forever mantra," he writes. "In addition, traders are viewed as gross speculators, and thus bad investors. ... Selling itself, which they do frequently, is viewed as an evil. Patience, after all, is reputedly a virtue."
Plus, "selling a stock that has done well evokes the pain of parting with a beloved pet or favorite collection, while selling a loser admits defeat and an intellectual shortcoming. ... Refusing to sell also lets us avoid distasteful costs - commissions and especially taxes."
Selling, he writes, "must become a routine act - as normal in your own mind as buying." |
