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The Equitymaster Research Digest

Good Sector with Bad Stocks, 20th Anniversary Celebrations, and More...
Dec 18, 2015

We have learned to live with it. If you are a regular reader, I'm sure you have too.

I am referring to the 'Good Year, Bad Stocks - Bad Year, Great Stocks' syndrome.

We struggle to find stocks during bull years. But we are spoiled for choice during years when no one wants to touch stocks.

You see, in a process-driven approach to investing, not every year is going to produce the same investing results. There will be years when whatever we touch turns to gold. Then there will be years when our success rate will take a beating.

If I look at the track record of our longest running service, StockSelect, 2005, 2008, 2009, and 2014 were perhaps the best years in the history of the service. Not only did stock recommendations from these years meet their target prices well within the timeframe, but some went on to fetch a multiple of our expected returns.

On the other hand, 2008 and 2011 are years we would never want to revisit. Our recommendations failed to have any significant impact. Forget holding on to their stock prices; some even suffered declines.

It's all about the cycles.

But it is the bad years that tend to make some of our team members jittery. Not having seen a complete stock market cycle, they often take the blame on themselves and start doubting the stock picking process.

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