Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
GOLD BULL RUN TREND ANALYSIS - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19
Central Banks Move To Keep The Global Markets Party Rolling – Part III - 14th Aug 19
You Have to Buy Bonds Even When Interest Rates Are Low - 14th Aug 19
Gold Near Term Risk is Increasing - 14th Aug 19
Installment Loans vs Personal Bank Loans - 14th Aug 19
ROCHE - RHHBY Life Extension Pharma Stocks Investing - 14th Aug 19
Gold Bulls Must Love the Hong Kong Protests - 14th Aug 19
Gold, Markets and Invasive Species - 14th Aug 19
Cannabis Stocks With Millennial Appeal - 14th Aug 19
August 19 (Crazy Ivan) Stock Market Event Only A Few Days Away - 13th Aug 19
This is the real move in gold and silver… it’s going to be multiyear - 13th Aug 19
Global Central Banks Kick Can Down The Road Again - 13th Aug 19
US Dollar Finally the Achillles Heel - 13th Aug 19
Financial Success Formula Failure - 13th Aug 19
How to Test Your Car Alternator with a Multimeter - 13th Aug 19
London Under Attack! Victoria Embankment Gardens Statues and Monuments - 13th Aug 19
More Stock Market Weakness Ahead - 12th Aug 19
Global Central Banks Move To Keep The Party Rolling Onward - 12th Aug 19
All Eyes On Copper - 12th Aug 19
History of Yield Curve Inversions and Gold - 12th Aug 19
Precious Metals Soar on Falling Yields, Currency Turmoil - 12th Aug 19
Why GraphQL? The Benefits Explained - 12th Aug 19
Is the Stock Market Making a V-shaped Recovery? - 11th Aug 19
Precious Metals and Stocks VIX Are About To Pull A “Crazy Ivan” - 11th Aug 19
Social Media Civil War - 11th Aug 19
Gold and the Bond Yield Continuum - 11th Aug 19
Traders: Which Markets Should You Trade? - 11th Aug 19
US Corporate Debt Is at Risk of a Flash Crash - 10th Aug 19
EURODOLLAR futures above 2016 highs: FED to cut over 100 bps quickly - 10th Aug 19
Market’s flight-to-safety: Should You Buy Stocks Now? - 10th Aug 19
The Cold, Hard Math Tells Netflix Stock Could Crash 70% - 10th Aug 19
Our Custom Index Charts Suggest Stock Markets Are In For A Wild Ride - 9th Aug 19
Bitcoin Price Triggers Ahead - 9th Aug 19
Walmart Is Coming for Amazon - 9th Aug 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Who Says “Buy and Hold” is Dead?: How to Double Up on Growth

Stock-Markets / Investing 2009 Mar 10, 2009 - 02:37 PM GMT

By: Q1_Publishing

Stock-Markets

Best Financial Markets Analysis ArticleYesterday, the Dow fell for the 14 th trading day out of the past 18. The sharp downturn only caps off an already disastrous market downturn.

As we've been expecting, many commentators say it's the nail in the coffin for “buy and hold” investing – a strategy which has worked for the past five decades.


As they write their eulogies, which undoubtedly contain numerous references to “worst since” factoids, buy and hold is not dead. Yes, it is the worst possible strategy for this market. And yes, anyone holding out through this downturn has certainly paid a high price.

However, buy and hold will have its time again. Chances are they're not holding the right stocks and they're not getting in anywhere close to the right time. Let me explain.

It's no secret to Prosperity Dispatch readers we're entering the early stages of a stem cell/genomics/healthcare technology boom and eventual bubble.

All the right conditions are in place.

The entire world is getting older.

The overall market is continually sliding and investors are searching for safety. Historically, the healthcare sector has been viewed as a safe haven.

The U.S. government seems bent on ensuring everyone has access to healthcare regardless of the cost.

The healthcare sector has it all. But not everyone will be a winner in this boom. Hospital management companies, health insurance companies, and long-term care providers which rely on government payments will get hit hard (most have already). The way things are shaping up, if Big Pharma isn't careful, it will get swept away too.

In a time of change for an industry, the big winners will be the companies who bring the change. That's why I'm always looking for healthcare innovators. The companies who will help reduce the cost, increase the effectiveness, and steal market share by introducing new business models in an industry which hasn't changed much in the past 50 years.

They're in prime position to benefit exponentially from the healthcare boom.

Doubling Up on Growth

In a way, the innovators will be the ones doubling up on growth. They grow in two ways. They will grow from growing market share – a good way to grow. They'll also grow by taking market share away from competitors at the same time the overall market is growing. They'll be experiencing the exponential growth which has created so many massive fortunes in the past.

Think of a company like Intel for example. It started out as a regular old processing chip company in the 70's. It was one of a few hundred – all indistinguishable from the other.

The company was facing relatively average growth up until the 80's. It wasn't until it doubled up on growth the company became the multi-billion dollar, market dominating force it is today as the top microprocessor company in the world.

The key thing in Intel's storied history is it was able to grow market share while in a growing market. This is the #1 strategy for making a fortune in growth stocks. It's the time when companies experience exponential growth. It's also when Wall Street, which always thinks the present conditions will go on forever (whether they're currently great or horrible), values a strong performer at astronomical levels.

That kind of growth will come to healthcare innovators. And it's coming around soon. We've just got to look at the bubble boom slowly taking form to determine when to start buying in.

Anatomy of a Bubble Boom

A bubble boom is a funny thing. When you see it coming, it seems like it won't get here soon enough. When you're in the middle of it, it seems like it will never end. It's an extremely wonderful and dangerous time.

That's why we've got to keep an eye on all the indicators a bubble is forming and the warning signs of one about to burst in order to get in and out (just as important!) at the right time. So far, we've already watched the first three indicators a bubble is forming in the anatomy of a stock market bubble .

1. A simple, easy-to-understand story is in place – aging population, healthcare is a genuine need

2. Shares in a sector move up faster than the overall market - in a bear market we look for them to hold up better

3. Big money backing – Pfizer, Corning, Merck, and dozens of other companies are starting to pile in research funds along with plenty of venture capital firms putting what little venture capital there is to use in emerging healthcare companies

It's the next few indicators, which haven't appeared yet, which we'll see and know it's time to go in big. When we start to see these, we'll know we're in the early to middle stages of a boom and a bubble lurks around the corner.

4. Mainstream media support – they're just itching for the positive, feel-good stories of stem cell treatments, 60 Minutes is usually one of the “early adopters” of news media

5. Rockstar emerges – think Abbey Joseph Cohen for tech, T. Boone Pickens for oil, Nouriel Roubini for credit crisis – a “Rockstar” or “Face” for every big market story emerges

6. Hot new IPO's of “idea-stage” companies - when you stand back and think about it, most of them don't really do anything at all, but that won't stop people from buying them up

7. “It's different this time” – listen closely for this phrase, it could come from anywhere

8. Healthcare sector books – just look at how well all the crisis/depression/financial survival books have done and are on the shelves of your local bookstore now, the same will happen in a few years in healthcare – it always does

The latter few will mark the confirmation we're in a period of extremes. Whether that is an extreme euphoria or extreme pessimism depends on the situation. Oil, agriculture, and alternative energy sectors were hitting euphoric highs over the past few years. On the flip side, we're currently watching pessimism work its way to an extreme.

“Buy and Hold” is Dead?

First though, we have to wait for the overall market downturn to end. That's a very important thing few investors realize. As we've gone over before, general market conditions account for about 50% of any move in a stock, sector-specific strength accounts for about 30%, and company-specific events and growth account for about 20%. That's why it's imperative to wait for the downturn to show at least some signs of slowing down.

When will this downturn end? No body knows for sure - yet. A lot of other questions have to be answered first.

When will Secretary Geithner tell us something we can go with? When will he find people willing to jump on his sinking ship? (This is the clearest sign of how well this administration's financial team has handled the situation so far)

When will we see some sort of sweeping healthcare bill? When will dead companies be allowed to die? When will the government stop seeing this downturn as an opportunity to panic, increase taxes, and still manage set a record budget deficit? When will we learn who is going to get the raw end of the deal from the ballooning pension deficits – pensioners or taxpayers?

There are just too many uncertainties for any sustained recovery. As a result, the market continues to sell off. The market's are in reset mode. Practically no sector has been immune from this downturn.

The days of growth companies sporting P/E ratios of 30 with no hope of paying a dividend anytime soon are going to be gone for a while. The valuation methods are reverting back to bear market times when yields, cash flow, and operating performance matter.

It's a bull market short selling and there aren't too many reasons to start buying in a big way yet. (Side note: be prepared short-sellers – your editor included – keep the stops tight because the SEC can change back to the “uptick rule” at any moment and send the markets rocketing upward).

Despite it all, healthcare has held up a bit stronger than a lot of other sectors.

The world is hunkering down for a long economic storm. That's why I continue to recommend staying on the sidelines and slowly wading into the markets over the next two to three years until some form of certainty returns to the markets. There's no doubt this is the best buying opportunity in a decade. But given the length of this contraction and the amount of “resetting” that needs to be done, it's going to be quite a while until the economy recovers.

The old saying, good things come to those who wait. In a market like this, great things will probably come to those who wait.

Good investing,

Andrew Mickey
Chief Investment Strategist, Q1 Publishing

Q1 Publishing is committed to providing investors with well-researched, level-headed, no-nonsense, analysis and investment advice that will allow you to secure enduring wealth and independence.

© 2009 Copyright Q1 Publishing - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Q1 Publishing Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules