Everyone knows the nursey rhyme Humpty Dumpty. Nonetheless, let’s go ahead and take a “grown-up” look again:
Humpty Dumpty sat on a wall
Humpty Dumpty had a great fall
All the king’s stallion and all the king’s men
Couldn’t put Humpty together again.
The moral of this simple, but elegant parable is: If you are an Egg, don’t sit on walls. By the same token and in light of recent stock market activity: If you are a grossly overvalued overhead and over loved Nasdaq stock, don’t buy and hold or maybe, just don’t buy at all.
From Sep 2012 rose 10X to a high of $218 in July 2018. From that July high FB has dropped 45%. Had you bought FB at those highs, when FB could do no wrong and market sentiment on the stock and the company was as high as its price, you would have lost slightly less than ½ of your money.
From its March 2009 low under $25 per share, AAPL rose to a high of $233 in October 2018. Like FB, about a 10X increase in price. From its perch atop the $1Trillon market cap, AAPL then fell about 30% in just 30 days.
From a price of $200 in the Spring of 2012 to its all-time high of $2050 in September 2018, like its brethren above AMZN also ran up 10X right up into its own $1Trillion market cap atop that wall so high, it too fell into swirling winds of a nascent bear market, down 30% in just six weeks.
From $10 in mid-2012 to a high of $420 in June 2018, NFLX ran up 40X in six years. A no-brainer investment no matter when you bought it. Unless of course, you bought it near those June highs at the peak of the market’s enthusiasm because NFLX fall was just shy of 40% from peak to trough, or as Humpty would say, from the wall to pieces.
Google’s 10X run took it from the March 2009 lows to the July 2018 highs. This last of the notorious FAANG gang has since fallen “only” 25% and took to 3 months to hit the ground, except we don’t really know if it has hit bottom yet because it is still in free fall. Send for the king.
The Humpty Dumpty parable for investing in stocks is that nothing goes up forever and the faster and higher they rise, the harder and quicker they fall. Trends up or down are easy to follow with a ruler, a pen and a piece of paper. Or with a trend following service like Blue Line Trading. We do the heavy lifting…and we don’t fall off of walls.