Post of the Day
June 1, 1998

From our
Intel Board


Subject: Re: Delay in Merced
Author: FoolOnTheSill

"but I don't believe in holding a stock that has not done anything for 9 months and may well be dead money for another 1-2 years."

You may or may not be right about this particular stock, but looking at my portfolio I can see several examples of things that seemed "dead" and gave good results.

Eli Lilly, to my chagrin, is down 11% from Jan 1. Do I care? No, because It has still returned 70% from Jan 1 of 97. (Not annualized, just straight return) It's also returned somewhere over %2000 since I bought it in 1985.

  "If you look at the 10 best stocks you could have owned over the last 10 years, I bet there are significant periods of time for each of them where they have "not done anything" or even lost significant value."

Sears and Mcdonalds, on the other hand, were both dead weight to my portfolio last year - they both just barely broke even in 97. They're the best performers in my portfolio this year, returning 35% and 38% since Jan 1. Granted, on an annualized basis they still have underperformed for the last two years combined. My point, though, is that just because a stock "hasn't done anything for 9 months" doesn't mean it isn't a good investment to own.

I got 3Com at a cost basis of (wince) $52 a share and ended up getting out at $32. I didn't get out because I thought 3Com was "dead money", I got out because If I were only going to own one networking stock, I was going to own the one company that was best executing their strategy, Cisco.

I only own one semiconductor stock also. Can you guess who it is?

If you look at the 10 best stocks you could have owned over the last 10 years, I bet there are significant periods of time for each of them where they have "not done anything" or even lost significant value. Remember how bearish everyone was on Microsoft when Win95 kept getting delayed? It wouldn't suprise me in 10 years to hear people say "rembember how bearish people were when Merced got delayed?"

FoolOnTheSill


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