Nobody gave the New England Patriots much of a chance in Super Bowl XXXVI. The heavily favored St. Louis Rams were on a roll. The Rams and their high-octane finesse offense were shredding every team in sight. The Patriots had little to lose against the team billed as "The Greatest Show on Turf," coming in as double-digit underdogs.
As soon as Adam Vinatieri's field goal won it all for the Patriots, prompting reporters to drum up the most colorful David and Goliath comparisons they could muster on deadline's notice, it was clear that greatness was not a birthright. Someone had figured out a way to stop the mighty Rams.
In preparing for the big game, the Patriots stocked up on game footage of the one team that had given the Rams some trouble in the past. They noticed that when the Rams faced the Tampa Bay Buccaneers, the speedy receivers would be rendered ineffective after they were popped hard at the line of scrimmage. A pop in the mouth proved to be the team's Achilles Heel. So the Patriots got physical. It proved to be emotional as well.
Since the championship showdown, the Rams went on to lose every preseason game this summer. Sure. Those don't count. But now that they have lost the first four games of the regular season -- nine straight, dating back to the Super Bowl -- there's trouble in this aerial paradise.
Investing is like that. Traditionally great companies don't always stay that way. There are no bulwarks here. A company has to earn its financial weight every quarter when it steps on the scale. As Drip investors with an investing horizon a few exits shy of forever, it's a lesson worth learning. Names that sound great today can't just be tucked away and ignored for decades. Greatness needs to be watered, weeded, and replenished.
Now, I'm not implying that you should forget about buy and hold. I'm simply suggesting that you check every so often to make sure you know what you're holding. Remember the Rams. Remember every great football dynasty that came and went before them.
It takes a lot of fiscal muscle to make it onto the exclusive Dow Jones Industrial Average list. It's like the football filtering process where only the best make it to the next level. So the 30 Dow stocks have to matter, right? Sure. However, that hasn't kept some companies, such as Remington Typewriter, Studebaker Automobiles, and Woolworth's, from, well -- you know -- getting popped in the mouth.
A generation ago, how many investors pictured an early retirement on the back of a stock like Eastman Kodak (NYSE: EK)? The stock is back to where it was 10 years ago. Sure, the dividends have helped soften the stagnancy, but how about a company like Xerox (NYSE: XRX), where the yield mattress got pricked flat despite a corporate moniker that might just be the carbon copy of ubiquity?
For Kodak and Xerox, tomorrow came too soon. A wired electronic world didn't make photographs and paper copies obsolete, but it certainly made them less relevant. Kodak has made inroads in the realm of digital photography, but with lower barriers to entry and the dynamics not quite as attractive as they once were, the competition figured them out.
Gifting stock to children is a great way to get kids excited about the stock market. We preach it. But if you banked on McDonald's (NYSE: MCD), Hasbro (NYSE: HAS), and Disney (NYSE: DIS) to pay for your child's college education, don't be surprised if your toddler opens up a lemonade stand ASAP.
It's not just stocks. Investing philosophies get popped in the mouth, too. Sectors fall in and out of mania favor. While growth and value stocks tag each other in and out of the performance ring, you may find yourself falling behind if all you do is chase style over substance.
Football is a game of Xs and Os. The market works that way, too. Some Xs mark the spot, while Os mark other positions. Then the chalk moves the cheese. Remember when Sears (NYSE: S) ruled the retail roost, or you couldn't go wrong buying IBM (NYSE: IBM)?
But somebody figured them out. The Wal-Marts (NYSE: WMT) and Dells (Nasdaq: DELL) found a way to run a tighter ship. Maybe it wasn't a better mousetrap, but it was one made up of less moving parts.
Great athletes age, and not always gracefully. Intel's (Nasdaq: INTC) bum knee has produced inconsistent performance on the field. Apple (Nasdaq: AAPL) talked a big game, but it surrendered too much yardage in the trenches. A nickelback here. A dime defense there. Before you know it, you're losing a lot of ground in the field of green.
Will the Rams be back? Even with Kurt Warner out of commission over the next two months, it's certainly possible. Who would've thought that the San Diego Chargers would command the league's best football record this early into the season? Parity has been stitched into the fiber of the National Football League. Anything can happen.
Thankfully, investing isn't prone to the same number of lucky breaks and bounces. A debt-laden company isn't going to come back with a cash-rich balance sheet a year later. A stalwart isn't going to become a growth demon unnoticed. Yes, investing -- like football -- is a game of quarters. But there are no timeouts in the market.
Play on.
Rick Aristotle Munarriz has been a Miami Dolphins season-ticket holder since 1987. But don't hold that against him. He owns shares in Disney. Rick's stock holdings can be viewed online, as can the Fool's disclosure policy.
