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Which is exactly why you should never buy and hold an individual stock.
Srsly?
That's provably wrong. There are individual stocks that some have held for many decades and are bequeathing to the next generation. It's one way generational wealth is created.
Can you name a “hot” stock that was all the rage 50 years ago that is still hot today?
They all have their day, and then fall off the radar screen.
Well, if all you’re going to do is chase “hot” stocks, then you probably shouldn’t buy individual stocks. But there are lots of good old boring business out there that make money year after year for very long periods. Read up on the history of AJG or BRO, boring old insurance brokers. Very boring, very unsexy, and highly rewarding to long term shareholders. Or Berkshire, Visa/Mastercard, Texas Instruments, Cintas, Copart, Home Depot, or railroads, etc. I could name many more.
Stop thinking of stocks as shiny little objects to chase and start thinking of them as businesses, because that’s what they are.
Last edited by treasurekidd; 02-12-2024 at 04:33 PM..
Can you name a “hot” stock that was all the rage 50 years ago that is still hot today?
They all have their day, and then fall off the radar screen.
We could work our way through the Nifty Fifty stocks (U.S. companies, not the ones in today's index of Indian companies). These were the hot stocks of the day, circa 1960s-1970s. Working alphabetically I'll take the first one, which is American Express. I'll use Jan 1973 as the starting point, when these stocks still had their "hotness" premium. (Fifty years ago the stock market was in the midst of a severe bear). In Jan of 1973 Amex shares traded at a split-adjusted price of about $2. Today it closed at 212, so it's grown by a bit over 100x (compared to 42x for the S&P 500). Note that these are the gains in share price only.
Do the math and see the annualized return is fairly pedestrian. If that's your point then yes I agree. To my knowledge no company has grown at, say 50% annualized for half a century. Every successful company will eventually saturate its market, with the result being a lower rate of growth. But on the other hand, growing shareholders' money 100-fold is hardly "falling off the radar" in my estimation.
Sure, some of those 50 companies are defunct or nearly so... Digital Equipment Corp, Sears, just to name two. But the great majority are still significant. Some of them have gone through one or more acquisitions, so it takes some legwork to calculate their investment performance. Jeremy Siegel did that work in one of his early editions of Stocks for the Long Run. I see there is a sixth edition published in 2022; hopefully he included an updated version of that analysis.
We could work our way through the Nifty Fifty stocks (U.S. companies, not the ones in today's index of Indian companies). These were the hot stocks of the day, circa 1960s-1970s. Working alphabetically I'll take the first one, which is American Express. I'll use Jan 1973 as the starting point, when these stocks still had their "hotness" premium. (Fifty years ago the stock market was in the midst of a severe bear). In Jan of 1973 Amex shares traded at a split-adjusted price of about $2. Today it closed at 212, so it's grown by a bit over 100x (compared to 42x for the S&P 500). Note that these are the gains in share price only.
Do the math and see the annualized return is fairly pedestrian. If that's your point then yes I agree. To my knowledge no company has grown at, say 50% annualized for half a century. Every successful company will eventually saturate its market, with the result being a lower rate of growth. But on the other hand, growing shareholders' money 100-fold is hardly "falling off the radar" in my estimation.
Sure, some of those 50 companies are defunct or nearly so... Digital Equipment Corp, Sears, just to name two. But the great majority are still significant. Some of them have gone through one or more acquisitions, so it takes some legwork to calculate their investment performance. Jeremy Siegel did that work in one of his early editions of Stocks for the Long Run. I see there is a sixth edition published in 2022; hopefully he included an updated version of that analysis.
Let’s see…American Express, Coca Cola, Eli Lilly, Johnson & Johnson, McDonalds, Pepsi, Proctor & Gamble, Texas Instruments, Disney and Walmart. A lot of great companies that I would have loved to have bought in 1973 ( I was 4 in ‘73). If you have put just $1,000 into all 50 of the Nifty’s, even with all the dogs and zeros in the list, with those few and the others that were acquired, I would guess you’d still be way ahead.
...In Jan of 1973 Amex shares traded at a split-adjusted price of about $2. Today it closed at 212, so it's grown by a bit over 100x (compared to 42x for the S&P 500). Note that these are the gains in share price only.
Do the math and see the annualized return is fairly pedestrian. If that's your point then yes I agree. To my knowledge no company has grown at, say 50% annualized for half a century. Every successful company will eventually saturate its market, with the result being a lower rate of growth. But on the other hand, growing shareholders' money 100-fold is hardly "falling off the radar" in my estimation. ...
Indeed, even the hottest companies eventually asymptote towards more or less the market average. The reason to hold them across the generations, is to avoid capital gains tax upon selling them. One example with which I'm familiar is Proctor and Gamble, held by members of a friend's family since the stock first went public, around 1890. I'm too lazy to check, but likely, this stock outperformed the major indices through say the first half of the 20th century, but within living memory, has likely tracked or slightly lagged the S&P.
Less venerable, but more impressive, is the example of Microsoft. Microsoft has been a giant for some 30 years. It grew phenomenally when it was young and small, but has managed to hold its own, even after becoming a behemoth.
Even so, the example of a fast-grower that transitions to merely median growth, while not rare, isn't all that common either. This is why, individual stock-picking is in aggregate not so promising, even if in specific examples it manages to do quite well. Now, if only I could partake of some of those specific examples!
Yeah I'm not hearing a ton of "euphoria" from listening and reading interviews of so-called market experts. It's more like guarded optimism. The Fed reducing interest rates will surely help the equity markets this year but to what extent no one knows. Regardless, as always I'm staying fully invested in equities and will for the foreseeable future.
This was my point as well. There is a fair amount of skepticism right now. That is not typically an environment that precipitates any big crash. A 8-10% pullback/correction followed by a retrace sure, that happens from time to time in all rising markets, but a major crash I doubt it.
Too many people are expecting a crash, that in itself is a sign that it isn't going to happen. I remember 2000 and 2008, virtually nobody was expecting a crash. Back then if you said it's going to crash you would be laughed out of the door. We need that level of euphoria.
This was my point as well. There is a fair amount of skepticism right now. That is not typically an environment that precipitates any big crash. A 8-10% pullback/correction followed by a retrace sure, that happens from time to time in all rising markets, but a major crash I doubt it.
Corrections, defined as 10-20% declines, are totally normal. Think i read somewhere that the average correction is like 16%. They are simply a feature of investing that many can't accept so they morph into panic and make bad decisions. People also forget that the historical market returns for the past century of ~10% INCLUDE bear markets.
Berkshire Hathaway Class A first available in 1965. 59 years ago
Good picks, but remember that Apple was on it's way to being out of business before they brought Steve Jobs back in 1997.
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