Rant of the Day
Successful investing requires consistently buying stocks that do not reflect the value of the underlying company and then selling them when they do.
Sounds simple enough, right? I mean, Warren Buffett bought Coca-Cola [[KO]], American Express [[AXP]] and Wells Fargo [[WFC]] and just held them until everyone else realized the value (or something close to that).
Hm, that’s funny… “consistently buying stocks that do not reflect the value of the underlying company and then selling them when they do.” Turns out, Buffett regrets not selling Coca-Cola, [[KO]] in the 1980’s (KO stock was in the $80’s back then).
If you bought and held the Coca-Cola stock in 1998 – that’s 10 years ago – you’d be looking at a 25% loss, not including the dividends. Including the dividends you’d probably be at break-even or close to that.
I have no problem with buy-and-holding as such, but in my opinion the really lucky stories we all hear aren’t without an element of luck. You have to pick the right stock, the right industry at the right time to make it to that first million.
For example:
“If you had invested $25,000 in CNQ in it in Novemeber of 2001 you would be sitting on over 1.5 million dollars today. Hard to believe, but that shows you the strength of buying and holding.”
Rrrrright, and how many stocks went to $0 since then? And how lucky (or insightful) were they to buy at the very start of the commodities bull market?
Anyway, buy-and-holding is a legitimate strategy, I suppose. What bothers me is this: why is Coca-Cola always on the list of safe stocks, the ones that if you hold for a decade or more you’ll be rewarded?
It’s bogus! © Joe Garrelli
I’m short KO, because it’s a loser stock and I don’t like their product.
P.S. I now update my trades with 2-3 minute delay on the Portfolio page.