This morning I received my regular email update highlighting the feature articles in this month's edition of the AFR (Australian Financial Review) Smart Investor. I was particularly drawn to an article written by Tony Featherstone which was marketed as follows:
"Even when markets are falling, there are always companies that are a law unto themselves. Tony Featherstone uncovers six stocks with the competitive advantages to survive a crisis."
The six stocks highlighted in the article included Brambles (BXB). For those of you who have been closely watching the movements in the market, you will be aware that Brambles fell more than 10% on Friday. To be fair, at the time of writing this blog BXB has gained 1.56% but even this is less than the market averages for what has been a strong start to the trading week. The ASX 200 was up 2.68% at the same time.
For the year so far to Friday, Brambles is down 26.22% (including dividend) while the ASX200 is down only 14.36%.
In defence of the article, at its conclusion it does suggest a buy and hold approach and it may well be that Brambles picks up and is a winner in the longer term. However, if you bought the stock on Thursday you may have some doubts.
The real issue for me is that this example highlights the difficulty (and danger) in trying to forecast and pick winning markets yet alone winning stocks within those markets.
A well diversified, buy and hold strategy stacks up a whole lot better.