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The 50% Club
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Loading...People are fond of quoting Berkshire Hathaway (BRK.B) CEO Warren Buffett, and rightly so: He’s one of the world’s most successful investors. A favorite Buffett quote, from the 1988 Berkshire shareholder’s letter, is “Our favorite holding period is forever.”
Many people have used this quote to support a long-term buy-and-hold strategy, but, like many of Buffett’s observations, it’s much more nuanced than that – as it should be. A look at the stocks in the Russell 1000 Index, which measures large-company stock performance, shows that some stocks really shouldn’t be held forever.
Of those 1,000 stocks, 163 remain 50% or more below their all-time highs. The Russell 1000 has fallen 5.93% since its Sept. 20 all-time high, according to Morningstar.
The 50% Club
This group of beaten-up stocks includes some well-known members.
Citigroup (C), for example, is worth just 10.9% of its all-time high, set in August 2000. Morgan Stanley (MS), hit an all-time high of $110 in September 2000. It closed Friday at $44.13. And snakebit General Electric (GE), whose high-water mark was $60.50 in August 2000, traded hands at $8.02 on Friday. (This data, from S&P Global Market Intelligence, is adjusted for stock splits).
Many of the stocks in the 50% club are highly cyclical. For example, chip-maker Micron (MU), oil exploration company Apache (APA) and precious metals miner Newmont Mining (NEM) are good stocks to leave while laughing. While they have regular times in the sun, their big downturns often overwhelm their big gains.
Similarly, many of the bank stocks on the list were casualties of the most recent financial crisis. Banks suffer disproportionately in financial downturns, because banks are often at the heart of most financial downturns. It shouldn’t be surprising to see that KeyCorp (KEY) and Huntington Bancshares (HBAN) are among those that remain 50% or more below their all-time highs. Mutual fund companies Invesco (IVZ) and Legg Mason (LM) also are on that list.
Currently, Standard & Poor’s ranks 10 of the stocks now selling at 50% below their all-time highs as a strong buy:
Celgene (CELG)
Exelon (EXC)
First Horizon National (FHN)
FirstEnergy (FE)
FreeportMcMoRan (FCX)
Marathon Oil (MRO)
Morgan Stanley
Mosaic (MOS)
Olin Corp (OLN)
United States Steel (X)
If you’re looking for flowers to water, these might be worth a look. The full list of 50% Club stocks is below:
Trader Georgi Bozhidarov Read more:
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