No. of Recommendations: 4
LTBH part I


By xerohype

When you buy the very best stocks one of the best strategies to follow is to buy and hold them as long as their fundamentals are intact.

LTBH puts the work in the front end, selecting the very best companies, those that will deliver the best growth and returns for investors.

Go back to 1990, what were some of the best companies back then?

IBM, Apple Computer, Microsoft and Intel in the computer sector.

GE as a diversified global company.

MER as a broker.

KO and MCD in food.

Let's just take these 8, start a portfolio in 1990, just for kicks.

I'll pick Sept. 14, 1990, about 10 years ago.

GE closed at a split adjusted 4.9583.

KO closed at a split adjusted 8.9471.

MCD closed at a split adjusted 6.7183.

MER closed at a split adjusted 2.0495.

MSFT closed at a split adjusted 1.6597.

INTC closed at a split adjusted 1.0164.

AAPL closed at a split adjusted 17.

IBM closed at a split adjusted 26.0593.

S&P500 closed at 316.83 on that date and has returned 362.6% over that 10 year period.

Here's that random port of leaders, assuming you invested $1000 in each with a $100 commission (leaving only about $900 for each buy), intraday as of 9/26/00:

Symbol Last Paid Shrs Value $ Gain % Gain
S&P500 Index 1434.29 316.83 - - - 352.7%
AAPL 53 1/16 17 53 $2,812.31 $1,811.31 180.95%
GE 57 15/16 4.9583 181 $10,486.69 $9,489.24 951.35%
IBM 120 1/16 26.0593 34 $4,082.12 $3,096.11 314.00%
INTC 44 5/16 1.0164 886 $39,260.88 $38,260.34 3824.01%
KO 54 3/8 8.9471 100 $5,437.50 $4,442.79 446.64%
MCD 30 1/8 6.7183 134 $4,036.75 $3,036.50 303.57%
MER 65 11/16 2.0495 439 $28,836.81 $27,837.08 2784.46%
MSFT 63 7/8 1.6597 544 $34,748.00 $33,745.12 3364.83%
Totals $129,701.06 $121,718.49 1524.80%

You will notice that INTC and MSFT were big winners, but most of the others were not slacking off either. The idea here is to pick the leaders. There will be a few that underperform, but if you get a couple of ones that overperform then you have it made. I just picked those 8 names as names I would have recognized in 1990.

Peter Lynch says buy what you know and then go in and investigate the financials.

Here in this example you turned $8000 into $129,701.06, and that's not even counting the small amount of cash we had left over. Even with the recent haircuts of INTC and MSFT we ain't doing too badly!

I used Yahoo! Finance to find the historical quotes (adjusted for dividends and stock splits).

Fisher's LTBH method relies on doing a ton of DD before buying and to hold as long as the original premise for your buying remains intact.

LTBH requires that you keep up with your companies to make sure that the fundamentals remain intact, but the real message is that you may look into them 2-3 times a year if they are that solid to begin with.

We all have more important things to do than to stay glued to our monitors watching the gyrations of the market. In the long term the market will reward the best companies, in the short term anything can happen.


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