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reddingrunner (95.51)

"Over what TIME FRAME?"

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March 20, 2012 – Comments (1) | RELATED TICKERS: CAT , XYL , BLX

Not so much in CAPS, but in real life I'm coming to believe that an 18 month to 3 year time frame is the sweet spot for stock picking.  The 3 year maximum is simply because it is impossible to see further than that, or where the stock and its valuations will be then.  The 18 month minimum is because the only way to win at this game is to play a different game than the big boys (whose competition with each other totally dominates the game- the rest of us are just gnats buzzing around the edges) are playing.  

And they are playing a short-term game.  Not just the hyper-fast computer day trades, but they are all fixated on annual returns.  They make money on fees and quantity and when they have a bad year not only do they stop attracting clients (for at least another year) but the mega-mega-mega-pressure is on to make sure it doesn't happen twice in a row.  They can't even THINK about where a stock might be in 18-36 months from now.  

They might be all but certain that it will be much higher down the road, but they HAVE to play the short term prospects and ignore the mid-to-long term.  Yes, there are a few exceptions, the dwindling tribe of Buffettosauruses, but if you can come up with a good sense of how a stock will do in the 18-36 month range, you can trade knowing that you are playing a game where the competition is light.  

You just need to be sure that you have enough conviction to wait out the possible short-term drop or stagnation that the big boys and their computers are expecting in the short term game.  My list (actual holdings) includes stocks like CAT, AEGN, AGCO, CMI and XYL and Latin America in general.

1 Comments – Post Your Own

#1) On March 20, 2012 at 5:35 PM, Valyooo (99.39) wrote:

I COMPLETELY agree with you.  If your time frame is 50 years, you might marry a stock and hold it through terrible times, which is no good.  If you day trade, you are the small fish in a big pond.

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