3 stocks prove buy-and-hold isn't dead
Over the past decade, the Dow has suffered a 10% loss. But if you think long-term investing is obsolete, think again.
About once a week, as I make my rounds on Wall Street, I run into some hotshot thirtysomething with too much gel in his hair who scoffs at my method of fundamental analysis. He tells me that the market is so much quicker these days, that buy-and-hold is dead and I should get with the times.
My response is always the same: If getting with the times means being OK with the nationalization of American International Group (AIG), Freddie Mac (FRE), Fannie Mae (FNM) and Citigroup (C), I prefer to stay stuck in the past.
Anyone paying attention to the sales and earnings of these financial companies would have realized long before the market crash that these stocks were doomed. The traders with short attention spans who treated the stock market like a casino, however, were blindsided when it all came crashing down.
There's no denying that the past decade on Wall Street has been a downer. The Dow Jones Industrial Average closed just a few points shy of 11,500 on Dec. 31, 1999, and today is struggling to stay above 10,300. That's a 10% loss in 10 years, and those long-term investors who just tracked the market are really hurting right now.
But if you think this means buy-and-hold is dead, think again.
A good long-term strategy doesn't just keep you in line with the market -- it delivers market-beating gains. Case in point -- Apple (AAPL; +660%), OxyPete (OXY; +820%) and Ambev (ABV; +850%) are just a few blue chip stocks that have posted huge gains since 12/31/99. These are some of the bluest blue chip stocks, with market caps of more than $50 billion apiece and revenue of more than $10 billion annually. Most traders would call these stocks conservative -- but as you can see by these returns, the profits tell a dramatically different story.
See the complete list of 10 Blue Chips That Boomed in a Brutal Decade here.
You see, a good buy-and-hold strategy is predicated on purchasing stocks with a strong growth trend for the long term. It does not mean taking risky bets or chasing fads in the pursuit of instant profits. Sure, there are probably a number of penny stocks out there that surged 600% in just a matter of days. But those aggressive, volatile stocks carry a huge amount of risk that Apple investors would never have to shoulder.
Additionally, a good buy-and-hold strategy is not simply picking a random stock under the impression that the market will always trend up over several years even if there are some bumps along the way. To capitalize on a long-term investment, you must buy a stock that has staying power in any market. This involves buying companies with growing sales and earnings, with dominance in their industry and a plan for the coming years that will fuel future success.
While lightning-fast trades in risky stocks can make you a lot of money in a hurry, they can also lose you your shirt. After a rough run in 2008 and a brutal start to 2009, many investors are exposing themselves to even bigger losses in a race to make everything back in a hurry.
A much safer route is a good buy-and-hold strategy that will not just give you big returns, but also make sure your money won't just disappear.
Get my complete list of the 10 hottest blue chips of the last decade.
At the time of this writing, Louis Navellier owned shares of AAPL, OXY and ABV in personal or client portfolios.
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