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XMFHelical (< 20)

Have Patience with Quality - JNJ



November 27, 2007 – Comments (1)

I little unscientific CAPS data mining.

I notice that my JNJ pick is nearly in the green.  The selection to outperfrom SPY of this high quality company with a nice growing dividend was made way back on 6/19/06 - relatively early in CAPS.  For most of that time, it has been a bad pick.  Questions with stents in general (throughout the industry), and issues with EPO/Provenge have hurt the stock in the last year-plus.  But this is a great company providing necessary products (and has nearly-nothing to do with subprime mortgages).

So, my patience with JNJ looks like it is about to payoff for me in CAPs.  It is not the only example of this in my port, VAR comes to mind as well as a company that was down significantly and has since recovered relative to the S&P.

I was curious as to how the CAPS community dealt with the 1-1/2 years of JNJ underperformance, so I looked at the picks made prior to mine.  There were 43 selections of JNJ made prior to 6/19/06 (6367 overall - popular pick).  Of these 31 are still active and 12 were ended. 

31 Active picks - 3 in the red, 28 in the green (black?). [one of the reds is an underperform, the only active underperform from this long ago - they should have ended when ahead]

12 Ended picks - 7 in the red, 5 in the green.  3 of the 7 losers were underperforms; I note that all of the picks ended in the red would have been positive if the players were more patient.  Two of the 5 that ended with positive scores have re-upped JNJ.

So, overall, these early CAPS players have managed to exercise a good degree of patience and did not react impulsively to the JNJ underperformance of the past year and are now being rewarded for it.  Those that did react impulsively were for the most part punished in the CAPS scoring.  Certainly patience is easier to do in CAPS than reality, where you see your real $$ dropping in value - but if CAPS can reinforce the mindset of patience, then all the more power to it.

Another lesson, close your underperforms when you are ahead, especially in quality companies.


1 Comments – Post Your Own

#1) On November 28, 2007 at 5:47 PM, rbenesh (89.83) wrote:

Once I got past that first sentence :),  this post makes a lot of sense.  I'm glad you went back and reviewed the calls - I know Netflix was trying my patience (and brokerage account) until recently, so I understand both sides.  

One quible though,  since I make my CAPS picks for a duration of time, I stay till the end (even if it kills my score) unless something fundamental changes.  In my mind, this is the true test of my call.


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