Buy, Sell, or Hold?

In celebration of the holiday season, Bill Mann looks back over the year and provides commentary about some of the trends prevalent in 2000. Using The Motley Fool Radio Show's "buy, sell, or hold" approach, Bill comments on the elections, the Internet, and Wall Street analysts. Downgrade Henry Blodget? Sure, after his stock has dropped 90%.

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By Bill Mann (TMF Otter)
November 22, 2000

As we come up on the holiday season, I thought I'd celebrate the fact that I have drawn the short stick for the day before Thanksgiving -- the day that traditionally sees the lowest readership of the entire year -- by writing an entirely content-less column. Your dedication to Foolishness will be rewarded!!

Yep, this one'll be as light and airy as a hot Krispy Kreme (Nasdaq: KREM) doughnut. You want to hear sweet nothings about the moronic analyst cuts on networking stocks? Come back on Friday. I'd better look out, I'm getting dangerously close to adding value. Better back off before I slip and say something meaningful.

I'm being overtly flip about this because, inevitably, when I have a little fun in the Fool on the Hill space, some humorless oaf kvetches at me about "having a point" or some other fool thing. So, I'm pre-announcing -- no points will be made here today. Even if you're tempted to write, don't be that guy.

Instead, I'm going to reprise a game we play with guests on The Motley Fool Radio Show. It's called "Buy, Sell, or Hold." But, rather than discussing stocks, we're going to talk about concepts, people, or things.

Let's delay no longer.

Wall Street Analysts
Buy: Michael Mauboussin
Sell: Henry Blodget
Hold: Alice Schroeder

Credit Suisse First Boston's Chief Investment Strategist Mauboussin consistently shows why he is one of the great thinkers on Wall Street with his heady and high-minded thoughts about the public marketplace, value drivers, and investor psychology. His series at CAP@Columbia is a must-read for any investor whose analytical chops run beyond "I hope this stock goes up."

For my "sell" call on Merrill Lynch's (NYSE: MER) Henry Blodget, I am simply using some of his own logic, waiting until after he has fallen from the heights to downgrade him....

Alice Schroeder of Morgan Stanley Dean Witter (NYSE: MWD) gets a "hold" for her yeoman's work on covering Berkshire Hathaway (NYSE: BRK.A), the only Wall Street analyst to do so. She has gained trust and admiration from Berkshire's notoriously analyst-unaccomodating chairman, Warren Buffett. I'd rate her a "buy," but Warren tends to hold for the very long term.

The Elections
Buy: Internet Coverage
Sell: "Chad" as a forename
Hold: The Electoral College

Were it not for the Internet and real-time updates of the Florida vote count, Al Gore might have conceded too early based on errant calls that George Bush had won the state. Whether we consider this a service now, two weeks and no decision later, is debatable, but where the networks blew the coverage, the Internet did not.

It's going to be a cold day in hell before the name "Chad" shows up on a top-10 baby name list any time soon. This election has done for "Chad" what Ms. Lewinsky did for the name "Monica" three years ago.

The Electoral College has taken some knocks since the end of the vote, as millions of Americans had their hops-obscured civics classes come back from the depths. Just what does a Representative Democracy mean? Ask the people of Wisconsin who, were it not for the Electoral College, would get about as much attentions from presidential candidates as cauliflower does in a kennel.

The Internet
Buy: E-commerce
Sell: E-Commerce
Hold: E-Commerce

The death toll for dot-coms grows by the day, as piles of dreck (Nasdaq: GDEN) and (Nasdaq: MDCM) have joined the list of companies ceasing operations. This will continue, but for every expiration of a bad idea there is proof of explosive growth of the Internet as a conduit for business transactions. For every (Nasdaq: IPET) (is there any wonder why pet stores hadn't jumped on the chance to ship dog food to people?) there is an I2 Technologies (NYSE: ITWO) changing the ways businesses transact over the Internet. The Internet? Not going anywhere. E-Commerce? Not going anywhere.

Portfolio Theories
Buy: The Index Fund
Sell: Day Traders
Hold: Long-Term Buy & Hold

The gruesome contractions of the high-flying Nasdaq Composite is making people who were accustomed to annual 20%+ gains question whether they do have the chops to choose stocks. Good. This is as it should be because, by definition, half of all investment money fails to match the market.

While some full-service brokers are crowing that the much-maligned professional is coming back to the forefront, it's wishful thinking that those who have had their eyes opened to the underperformance of an overwhelming percentage of professionally managed money will come running back. "Oh please, won't you charge me to lose to the market?" I don't think so. The winner here? Passively managed, low-headache, low-tax, low-turnover index funds.

Has a market phenomenon ever disappeared as fast as day traders? Geez, eight months ago the powers-that-be were so concerned about our inability to police ourselves that day traders were the topic of Congressional hearings. Well, some of us can't police ourselves and, as soon as the Nasdaq lost its luster, those who were most likely to feed on the excess dropped from our collective radar screens. Oh sure, there are still a significant number of day traders, some I'm sure are making money at it. But, it doesn't seem so easy anymore.

And, finally, the Church of Long-Term Buy-and-Hold has taken a few on the chin this year, as investors who had no problem "holding" in a consistently rising market have had their convictions tested by a steep downdraft. LTB&H might be as misunderstood as day trading because it should have never been used as a rationale for investors to jump in and sit tight on crappy companies. Yet, millions did (including, in one instance, yours truly). LTB&H has the benefit of being the most tax-efficient, best method for long-term gains in the markets, so even in a period when it was badly misused by so many, there is little chance of it losing its relevance.

TV Market Commentators
Buy: Joe Kernen
Sell: Maria Bartiromo
Hold: James J. Cramer

Kernen is the best thing about CNBC. In my opinion Kernen is the conscience, the redeeming factor, in the babble-a-thon that calls itself financial television. Joe routinely pillories Wall Street analysts' herd mentality. Save an admittedly light touch around General Electric (NYSE: GE), the "parent of this network," he calls 'em like he sees 'em.

Bartiromo calls 'em like she sees 'em, too. Unfortunately she is as blind as a bat. Bartiromo uses her slot just prior to the opening bell on CNBC to spout off inimitable blather about analyst comments on certain stocks, without ever taking the time to investigate or comment on the historical performance of her sources. Most recently she reported that "unnamed sources" claimed that Dell Computer (Nasdaq: DELL) was firing employees. The "Money Honey" might hold a coveted slot in the trading day, but until her perspective increases beyond the previous and next 15 minutes, she is part of the problem and nothing more.

James J. Cramer's had a tough year, between the wheels coming off at (Nasdaq: TSCM) and being exiled from Fox and CNBC. He'll be back. He's a survivor, and he can type and talk faster than you.

A Bonus Call:
Business managers are known to quote their favorite market gurus. Machiavelli, Sun Tzu, Warren Buffett, and Peter Drucker's wisdom have been used and misused so much as to be cliched. So, this year I'm putting a "Strong Buy" on that thinker, that mogul of film and television, Fozzie Bear. Who can forget when he said, apropos of nothing, "I'm a Professional! I've had three performances!" Now that's business sense we can all understand.

Fool on, and have a safe and happy Thanksgiving.

Bill Mann, TMFOtter on the Fool Discussion Boards