Built to … Deterioriate
Jim Collins and Jerry Porras gave us Built to Last about a decade ago. I'm not so sure. ("Not so sure"? Try: "Flat out disagree"!) I have a new ally. Consider this from yesterday's Boston Globe: "Economic Life: Investment Strategies Must Shift with Realities," by featured columnist Charles Stein: "When it comes to investing, I am old school. Buy a good stock, stick it in the drawer and when you check back years later the stock should be worth more. There's only one problem. When I checked the drawer recently it was full of clunkers, including Lucent, down 94 percent from its 1999 high. Maybe once upon a time buy and hold was a viable strategy. Today, it no longer makes sense."
Stein continues with these "clunker" examples: Fannie Mae (incidentally, featured in Collins' subsequent solo Good to Great). Coke. ("Clunker," make that "Stinker.") Merck. (The mightiest fall—stock down 63 percent since 2000.) Uh ... Microsoft. ("Microsoft's stock price is no higher today than it was in 1998.") Clear Channel—down 32 percent this year; New York Times (owner of the Boston Globe)—down 17 percent in 2004.
"It is not clear there is such a thing as a 'Blue Chip,'" Shawn Kravetz, president of Boston-based hedge fund Esplanade Capital, told Stein. "Kravetz's point is a serious one," Stein continues. "Greatness is not permanent. ... This process of creative destruction isn't new. But with the world moving ever faster, and with competition on steroids, the quaint notion of buying and holding is hopelessly out of step."