Post of the Day
July 13, 2000
Posts selected for this feature rarely stand alone. They are usually a part of an ongoing thread, and are out of context when presented here. The material should be read in that light. How are these posts selected? Click here to find out and nominate a post yourself!
DCLK & LTB&H
Recently, a poster on the DCLK board has taken to using DCLK as an example of why LTB&H is a failed strategy. There are a few issues I would like to address regarding these oft-repeated statements.
First, the particular individual lists their investment style as a multi-day or multi-week trader. I would suspect that an individual with this very short-term view of the market does not truly understand the philosophy of LTB&H.
Second, the individual continues to repeat his mantra of why DCLK is an example of the failure of LTB&H. Who is he trying to convince most with this incessant repetition? I suspect it is himself.
Third, he gives only one example - DCLK's performance over the last 6 months. Now, unless you're an amoeba or a mayfly, 6 months just doesn't cut it as long term. In my way of thinking, long term is 3, 5 or 10 years. If you invested in DCLK on it's first day of trading (4/8/98) at the closing price of $8.97, you would still have a 2+ year return of 218% DESPITE the recent fall from it's high of almost 79%!!! Is it fair to pick DCLK's opening day price? No fairer then choosing it's high, I guess. But if you're going to look at LTB&H, then look at LTB&H.
So why does our friend pick DCLK as an example of LTB&H failure? Let's examine his stock favorites as listed in his profile:
Stock 7/11/00 High Return
BVSN $35.06 $93.29 (62%)
DISH $38.63 $81.25 (52%)
PG $55.13 $118.37 (53%)
ATMI $46.00 $60.75 (24%)
ARXX $38.50 $71.50 (46%)
MERQ $113.50 $134.50 (16%)
RATL $92.34 $105.00 (12%)
CY $43.56 $58.00 (25%)
MSTR $28.81 $333.00 (91%)
T $32.00 $61.00 (48%)
ARBA $91.13 $183.34 (50%)
Wow. No wonder our friend is so down on LTB&H. However, I believe it is more indicative of his own stock picking abilities then anything with the LTB&H philosophy. Is it fair to pick a comparison to the stock highs? Probably not, even though that is what our friend is doing.
And why pick on just one stock? Why not look at the 5 and 10 year LTB&H records of several other companies like MSFT, INTC, DELL, ORCL, etc. In hindsight, it's easy.
Personally, I've been following DCLK for about a year or so. I think it's long term potential is exciting even though it is fraught with uncertainty. When it fell below $50, I thought it was worth the risk and added some to my portfolio. I knew the risks. Am I happy it's fallen to $28.50? No. Am I complaining about it? No, I knew the potential (both up and down) when I invested. What if it continues to fall? Frankly, I'll probably add some more to my portfolio. As a LTB&H investor, I don't worry about day-to-day activity too much. My focus is on 3, 5, and 10 years down the road. That's when we'll see who was right and who was wrong.
Interestingly, Bloomberg Personal Finance magazine did a study about LTB&H vs. traders. In a study of 88,000 investors, they found that those that trade too actively were underdiversified, clung to their losers, and bought stocks that happened to grab their attention. The 20% of investors who traded most earned an average annual return that was 5.5% lower than that of the least active investors. Of course, I'm sure our friend is an exception to this study.
In conclusion, if you enjoy trading then God bless you and good luck. As a LTB&H I wouldn't think to give you any trading advice. And, as a trader, please don't try to tell me about LTB&H. You obviously don't understand it or the potential benefits it has (not the least of which is less time fretting over investments and more time with family and friends).
We LTB&H folks have, well, a long-term memory. I'm content to wait a couple of years and see how this company is has done. I wonder if our friend will still be around?
Read More Posts by This Author
Go To This Post
More Recommended Posts