Futures Surging…Buy & Hold Does Work

By iamned - Last updated: Wednesday, May 20, 2009 - Save & Share - Leave a Comment

News Update: Bank of America Share Sale Raises $13.5 Billion After Stress-Test Verdict

blah blah blah Bank of America stocks falls 5% in after hours, and quickly regains it all. That Bank of America is able to summon $13 billion dollars without consequence is proof that you can, in fact, inflate your way to prosperity. Maybe short sellers who have lost their shirts in recent months can go online to apply for the ‘bad bank’. I’m sure there’s a nifty form where you can input how much money you’ve lost.

Futures surging yet again. It’s fun being smart and making easy money with GOOGLE, POTASH, and Mastercard stock day after day after day after day…

grrg

If you have ES short contracts cover them NOW (at a loss). If you’re shorting stocks you’ll have to wait till 5:00 AM Pacific like the rest of the schmucks to cover (at a loss).

And now our feature presentation….da da dum !!!

Chad Brand wrote an interesting article on seeking alpha regarding the validity of the buy & hold investing methodology. He writes:

The current bear market resulted in the first negative ten-year period for the U.S. stock market in a long time. This has prompted many people to declare that the investment strategy of buying and holding stocks for the long term (”buy and “hold” for short) is all of the sudden “dead” or no longer viable.

However, empirical evidence has shown that buy & hold does work for stocks that fall under the following criteria:
.
1. Large cap (market cap should exceed $15 billion)

2. Benefits from a weakening dollar, steady inflation, and globalization

3. Steady, strong YOY EPS growth

4. Market dominance

5. Superior 5 year returns vs. the S&P 500

6. Relative insulation from macro economic events

Detractors of buy & hold often defer to charts of a stalwart companies whose stocks has failed to appreciate such as Coca Cola:

gg

The example of KO would only meet some of these criteria. It fails with regards to 3, 4, 5, given that Pepsi Co is a major competitor, for example.

There are only a handful of stock that meet all or most of the criteria; Google, Bidu, Research In Motion, Apple, Mastercard, Visa, Potash, Mosaic to name a few. Google is perhaps the only company that meets ALL the criteria.

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