No. of Recommendations: 8
I happen to own Verizon, or I did unless I've sold it. In my reviews of my stocks in the last month (a haphazard event that occurs sometimes monthly, sometimes yearly, and sometimes less frequently than that), I noticed an interesting trend.

Here are the RMS calculations (from www.bmwmethod.com; thanks Denny!) for VZ this week:

VZ 25 years 0.21
VZ 20 years 0.48
VZ 16 years 1.76

When I looked at them last week, the 16 year chart was actually above +2 RMS.

When I started looking, I realized that many of the other stocks I watch have a similar pattern. Over the long term, they are at the average, or so, of their performance. But in the shorter term shown on a 16 year chart, they're at the top of their ranges. So what is this odd pattern? It becomes instantly apparent if you actually look at the chart, at least it does to me.

Here's the VZ 25 year chart:

http://invest.kleinnet.com/bmw1/stats25/VZ.html (thanks Mike!)

What's interesting here, and what's affecting all the charts with a similar pattern, is the 2000 dot.com bubble. The whole bubble, from the 1997 start of the run-up, is still included in those charts, making the starting prices suddenly out of whack.

I think that, at least for the next few years as the 16 year charts continue to begin in the midst of the bubble, you'll see patterns that aren't so useful.

On the other hand, the longer charts (25 years and up) will be less affected by the dot.com bubble and 2008 crash simply because they contain more data.

AT&T (T) is another good example of a chart significantly affected by bubble appearance and then burst. Their price ran up in the 2000 stuff and also prior to 2008. Manitowoc (MTW), on the other hand, didn't budge in 2000. They're a heavy machinery company with no technology exposure. The 2008 crash, however, is clearly evident in their chart.

My point, such as it is, is that using charts to determine reversion to mean right now is a bit dicey. Volatility and external influences are common in the recent past and seem likely to continue in the future.

My approach will continue to be to look for good value in companies whose businesses I understand. GE is an interesting one to look at these days. It's actually below its 30 year -2 RMS. If you look at the last few years, you'll see that their business model changes led to a whole lot of unsustainable craziness. I wonder if they'll try it again, or go back to a steadier growth pattern.

ThyPeace, heading back on-topic just for fun.
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