[speak] ThurmSpeaks::Buy-And-Hold is So 20th Century

I want to buy a stock and hold it for a long time. In a nutshell, I want to be a long-term investor, where "long-term" is in units of years (and preferrably decades); however, the buy-and-hold investment strategy keeps getting increasingly difficult.

I read the following on 24 November 2010.

   "My research leads me to believe that the U.S. markets will 
    continue their sideways journey over the next decade, much 
    as they did in the previous decade.  In such markets, the 
    traditional buy-and-hold approach doesn't really work, so 
    you need to modify your approach, starting with the idea 
    that you want to become a buy-and-sell investor." --
    Vitaliy Katsenelson by David Galland via John Mauldin

I agree with Katsenelson's assessment, but there are instances when buy-and-hold still works and Amazon.com stock provides an example of one of those instances.

On 24 November 2010, the day this note was written, the shares of Amazon.com (nasdaq: AMZN) made a new all-time high of $177.90. Nine years earlier, shortly after the dot-com speculation ended and three months after 911, I purchased 100 AMZN shares for $9.68 per share (and a $12 transaction fee). I didn't want to be an Amazon.com shareholder, but I bought the shares because they seemed cheap and we had the money to make the purchase. At the time of the buy, I was a statistifed Amazon.com customer; I thought Amazon.com was an excellent website; and I liked how Amazon.com's quarterly reports always started with cash flow and shares outstanding. But I disagreed with the company's patent philosophy and practices. Again, I didn't want to be an Amazon.com shareholder--and because this was a post-911 time frame--I sold chunks of AMZN shares as they kept increasing in price. In other words, I abandoned my buy-and-hold investment philosophy.

   #shares  price       date       % gain   holding period
   =======================================================
     50     $ 21.75  02/26/2003     125%      1 yr  2 mon
     25     $ 28.46  04/25/2003     194%      1 yr  4 mon
      5     $ 41.97  07/27/2005     333%      3 yr  7 mon
     10     $ 59.76  02/02/2009     517%      7 yr  1 mon

On 24 November 2010, 8 years and 11 months after they were purchased, we still owned ten AMZN shares.

[side-bar] Amazon.com went public on 27 June 1997 at $1.49 (adjusted for dividends and splits). AMZN split 2:1 on 2 June 1998; 3:1 on 5 January 1999; 2:1 on 2 September 1999. Excessive dot-com speculation took place during the late-1990s as evidenced by the fact that AMZN split three times over the span of 15 months.

   $  1.49 on 27 June      1997   [went public]
   $113.00 on 09 December  1999   [dot-com high]
   $  5.97 on 28 September 2001   [post-911 low]
   $  9.68 on 24 December  2001   [our buy]
   $177.39 on 24 November  2010   [all-time high]

Our investment generated $1600 in cash and on 24 November 2010 our ten shares were worth $1779. Turning $980 into $3379 is a good investment; up 245% in nine years--a couple of which were during what was supposedly the "worst recession since the great depression." But... If we had kept to a buy-and-hold investment strategy and not sold any AMZN shares, our AMZN investment would have been worth $17,739 (i.e. up 1710%).


Creator: Gerald Thurman [gthurman@gmail.com]
Created: 24 November 2010


Amazon.com Droppings

For a while Amazon.com hosted WikiLeaks, but they booted WikiLeaks from their cloud. On 2 December 2010, WikiLeaks started advocating a boycott of Amazon.com.

@nanofoo received the following tweet from @DanGilmor on 2010.12.02.

	Just donated some Amazon stock to the Electronic Frontier Foundation, 
	which fights to keep Net open and free, unlike Amazon.