Is the Buy & Hold Stock Strategy Officially Dead?

[shanrui_91]

Is the Buy & Hold Stock Strategy Officially Dead?
Published: Monday, 25 Jun 2012 | 11:08 AM ET Text Size

By: John Melloy

If you hold onto an investment for longer than five days, consider yourself the new millennium’s version of Benjamin Graham.

The average holding period for the S&P 500 SPDR (SPY), the ETF which tracks the benchmark for U.S. stocks, is less than five days, according to shocking statistics in analyst Alan Newman’s latest Crosscurrents newsletter.

“Given recent average volume, the SPY trades its entire capitalization and then some each and every week,” wrote the always-provocative analyst. “Does anyone really wish to argue where valuation might enter the picture in this scenario? Value does not matter in the slightest.”

Analysts blame the hot potato market on the disappearance of the individual investor and the entry of the high-frequency trader. After three bear markets in the last decade, individual investors – especially baby boomers careening toward retirement – don’t have the risk tolerance to be burned once again.

“True liquidity has not come back and the pros and high frequency traders rule the world,” said Brian Stutland of Stutland Volatility Group. “Plus, if the average person ever comes back, then they won't have time to play all day long back and forth in the market. So, maybe buy and hold really is dead.”

Newman notes in his newsletter that the average holding period for all stocks was almost four years from 1926 through 1999. After a tech mania, a housing bubble, and the explosion in electronic trading, the average holding period sits at just 3.2 months today.

The decline in mutual funds and rise of short-term oriented hedge funds are also partly to blame for this trend, investors said.

“From the hedge fund perspective, we are judged on monthly performance, and three months is a lifetime,” said Brian Kelly of hedge fund Shelter Harbor Capital. “Ask any hedge fund or mutual fund manager for how long do they believe they can underperform the market and I guarantee they will tell you, ‘One quarter.’”

In one of the most extreme examples of our day-trading, computer-driven investment culture, Newman unveils this gem: “In the three months from the beginning of March to the end of May, transactions in Apple comprised one of every $16 traded in the U.S. market, very likely the most concentrated focus on one stock in stock market history.”

How many of the human beings or machines behind those trades looked at Apple’s price-earnings ratio?

“I speak with retail investors every day and I can tell you that more than ever, they believe that the stock market is a casino for the large and well-connected investors,” said Mitch Goldberg, ClientFirst Strategy in Woodbury, NY. “Of course, different investment styles go in and out of favor every so often, so to be a long term investor, you’d need a ton of patience and very thick skin. Eventually, the Graham and Buffett way will be back in favor and I think that is what will encourage the retail investor to step back into the market.”

http://www.cnbc.com/id/47947707

[wsreader]

The first ever dividend I received was also the first dividend for the company after its listing. After all these years, I am still holding the share which is singtel. Buy and hold may be officially dead in usa, but not here.

[paullow]

[quote='wsreader' pid='27081' dateline='1340676765']
The first ever dividend I received was also the first dividend for the company after its listing. After all these years, I am still holding the share which is singtel. Buy and hold may be officially dead in usa, but not here.

It should be buy n hold forever for some stocks at cheap entry points, esp if one has bot singtel at $2, ocbc at $4 etc. Future troughs will not likely see such levels again.

[KopiKat]

It should be buy n hold forever for some stocks at cheap entry points, esp if one has bot singtel at $2, ocbc at $4 etc. Future troughs will not likely see such levels again.

In my case, the entry price doesn't affect my decision on whether to hold forever. For eg., I did ever buy Singtel at below $2. IIRC, after 911, it dropped to a low of $1.20? But once it recovered from it's lows, and after a few years of real growth in Revenue and more importantly in Net Profit from their various acquicitions, it seems to have stagnated for the past few years. This is also supported by their increasing dividend payout ie. that little growth they'd been enjoying is no more there and they seem to be running out of ideas (for growth), so better to pay out spare cash as div.

In such a case, why hang on to Singtel? From omy observation, share price had fluctuated around the $3 level ie. cd - will likely strengthen and even hit $3.3x or $3.4x. xd - more likely will be closer to $3 or even below.

So, unless there's a new growth catalyst or their Dividend Yield is sufficiently attractive enough, I don't see any strong reasons to continue holding on to Singtel, just because of the low entry price (except for the bragging rights). Not especially if you can find better alternatives for your free cash.

[CityFarmer]

It should be buy n hold forever for some stocks at cheap entry points, esp if one has bot singtel at $2, ocbc at $4 etc. Future troughs will not likely see such levels again.

In my case, the entry price doesn't affect my decision on whether to hold forever. For eg., I did ever buy Singtel at below $2. IIRC, after 911, it dropped to a low of $1.20? But once it recovered from it's lows, and after a few years of real growth in Revenue and more importantly in Net Profit from their various acquicitions, it seems to have stagnated for the past few years. This is also supported by their increasing dividend payout ie. that little growth they'd been enjoying is no more there and they seem to be running out of ideas (for growth), so better to pay out spare cash as div.

In such a case, why hang on to Singtel? From omy observation, share price had fluctuated around the $3 level ie. cd - will likely strengthen and even hit $3.3x or $3.4x. xd - more likely will be closer to $3 or even below.

So, unless there's a new growth catalyst or their Dividend Yield is sufficiently attractive enough, I don't see any strong reasons to continue holding on to Singtel, just because of the low entry price (except for the bragging rights). Not especially if you can find better alternatives for your free cash.

I agreed with the approach.

I bought Singtel twice at low. Once at acquisition of Optus (as low as $1.5), and another around 2008-2009 (average ~$2.7)

The last sell is @ $3.3 in 2010, to allow me to divert the fund to better alternative in the same industrial.

[orang]

It should be buy n hold forever for some stocks at cheap entry points, esp if one has bot singtel at $2, ocbc at $4 etc. Future troughs will not likely see such levels again.

In my case, the entry price doesn't affect my decision on whether to hold forever. For eg., I did ever buy Singtel at below $2. IIRC, after 911, it dropped to a low of $1.20? But once it recovered from it's lows, and after a few years of real growth in Revenue and more importantly in Net Profit from their various acquicitions, it seems to have stagnated for the past few years. This is also supported by their increasing dividend payout ie. that little growth they'd been enjoying is no more there and they seem to be running out of ideas (for growth), so better to pay out spare cash as div.

In such a case, why hang on to Singtel? From omy observation, share price had fluctuated around the $3 level ie. cd - will likely strengthen and even hit $3.3x or $3.4x. xd - more likely will be closer to $3 or even below.

So, unless there's a new growth catalyst or their Dividend Yield is sufficiently attractive enough, I don't see any strong reasons to continue holding on to Singtel, just because of the low entry price (except for the bragging rights). Not especially if you can find better alternatives for your free cash.

So agreeable and disagreeable.

One view reflects the thinking of a passive/part-time investor.

The other an account of what an active/fulltime investor does

One probably trades about 10 times a year

The other may do a hundred fold.

Ultimately both also can

[Temperament]

Every animal in the stocks market can make money. Only the PIG is slaughtered.

[changwk]

hi,

i just looked backed at my investment history, the oldest stock i have was bought in Apr 2006.
so, that makes it 5 years this year. the rest are between 2-4 years old. so, buy and hold is still alive in my practice.