A fantastic article written by Ben Carlson titled, “Some Stocks Don’t Come Back” is the inspiration for today’s Mullooly Asset Management video. In his article, Ben tells us, “the problem with ‘buy when there’s blood in the streets’ is that sometimes individual stocks don’t comes back from the dead”. Ben points to stats shared by Michael Batnick to back up this assertion.

Since 1980, 40% of all Russell 3000 stocks have undergone a drop of 70+% from peak value with minimal recovery. Examples of these stocks include AIG, Citigroup, Bank of America, and Fannie Mae.

What do we take away from this? We’re long term investors here at Mullooly Asset, but this shows us that “buy and hold” blindly is NOT a game plan. Some stocks simply do NOT come back. That’s why we watch for technical developments, like support line breaks, on our point and figure charts. They allow us to take the emotion out of investing.

Sources:

Some Stocks Don’t Come Back
The Risk of Concentrated Portfolios

Now Go Talk About It!