Superperformance Stocks: An Investment Strategy for the Individual Investor Based On the 4-year Political Cycle
A well-known investment adviser was interviewed by a national magazine a few years ago and asked to sum up the investment philosophy he would recommend for the person who still has twenty or thirty years in which to buy stocks. He advised buying to keep rather than buying to sell.
A financial columnist stated in another magazine: “The conventional wisdom of stocks being bought and put away for the long-term has been so discredited that there is no need to dwell on it here.”
Here are two financial advisers with two opposing opinions. Which one is right? Since the statements were made prior to the devastating 1973-1974 bear market when almost all stock prices declined severely-their steepest declines since 1929-and during a period of increasing pessimism concerning the national economy, the investment adviser who said that long-term investment has been discredited appears to be right.
During that year stocks declined in value about $500 billion. However, an investor who bought IBM, or Xerox, or Eastman Kodak, or any of a dozen or so other growth companies in the 1950s or early 1960s and has held the shares has certainly done very well.
But there are at least two problems. First, would an individual investor have done as well buying and holding even the most consistently strong stocks as by buying when prices were depressed and selling when prices appeared high?
I believe that the evidence on long-term charts such as those in Superperformance Stocks clearly indicates that better results are usually obtained by timely selling, and then repurchasing the stock or a more suitable one after a bear market has run its course.
Second, the best reason for selling when a stock turns weak is simply that many stocks never come back, and
others take many years to return to earlier price levels.
Part 1: The Search for a Successful Investment Strategy
- Chapter 1: Buy to Keep or Buy to Sell?
Part 2: When Should You Buy Stocks?
- Chapter 2: Business Cycles
- Chapter 3: Washington Policies
- Chapter 4: The Political Cycles
Part 3: Which Stocks Should You Buy?
- Chapter 6: Safety First
- Chapter 7: Superperformance Stocks: The Record
- Chapter 8: Look for Price Volatility
- Chapter 9: Look for New Earning Power
- Chapter 10: Look for Expandable Price/Eamings Ratios
- Chapter 11: Look for Good Sponsorship
Part 4: When Should You Sell?
- Chapter 12: The Timing Rhythm
- Chapter 13: Selling Short
Part 5: The Strategy for Success
- Chapter 14: Sources of Information and Ideas
- Chapter 15: Points to Remember