Netflix (NFLX) and 6 Stocks That Will Show You Why the Buy-and-Hold Strategy Doesn't Work
Netflix was one of the best performing stocks in 2023, with the share price up 48.5%. However, questions about the sustainability of its business model and concerns about "too little visibility" in the company's core business, as Goldman Sachs analyst Eric Sheridan pointed out, cast doubt on whether NFLX is a solid long-term investment. With potential gains on the table, investors may consider cashing in rather than holding the stock.
Pfizer, the biopharmaceutical giant, recently faced a setback with the end of clinical development for an obesity drug. The news sent the stock down 6.9%, erasing the previous months' gains. Although Pfizer is taking a long-term view with the potential acquisition of Seagen, the return on this investment is years away. This illustrates the need to reassess a stock's holdings when short-term events negatively affect its value.
Alcoa, a leading aluminum producer, is another example of a stock that may not be suitable for a buy-and-hold strategy. After reaching a peak in 2021, shares fell 64% on falling aluminum prices and negative earnings. A recent analyst downgrade from Morgan Stanley's Carlos De Alba adds to the bearish outlook for the stock. With no immediate signs of recovery, investors may consider other options.
Shares of Hershey’s have fallen 9.7% since hitting an all-time high in May. While the recent decline can be attributed to insider selling, the company faces other challenges that make it a less attractive long-term investment. With more than 50% of the company's shares held by institutional investors and a forward P/E ratio of around 26x, the stock appears overvalued. Rising commodity and transportation costs could also negatively impact earnings.
Disney has had a tumultuous year and its stock is once again trading near pandemic lows. Despite aggressive cost-cutting measures and a promising Disney+ streaming business, the company faces several challenges. Disney+ lost four million subscribers last quarter, and potential economic headwinds could negatively impact the company's theme parks. With no dividends to entice shareholders and an uncertain economic outlook, holding DIS stock may not be the best decision.
Anheuser-Busch is grappling with declining sales of its Bud Light brand and job losses at glass bottle suppliers due to production cuts. The company's frequent marketing campaigns failed to reverse the trend, putting further pressure on the stock. Although Bud Light remains the official light beer of the NFL, shareholders may have doubts about whether holding the stock is the right move.
3M is facing several lawsuits, one involving earplugs used by the US military and another involving the use of Editor's Note: This article was created using automated technology and then refined and checked for accuracy by a member of the GOBankingRates editorial team. "forever chemicals." While the latest lawsuit was settled, the company still has to deal with the earplugs lawsuit. To mitigate the impact on earnings, 3M may consider cutting its dividend, which would likely disappoint investors. With shares already trading at 5-year lows, it may be time for investors to reassess their position.
While a buy-and-hold strategy has its advantages, it is critical for investors to regularly review their holdings and make informed decisions based on current market conditions and company-specific factors. These seven stocks illustrate the importance of being proactive and responsive to changing circumstances in the investment world.
In the fast-paced world of stock investing, the buy-and-hold strategy has long been considered a proven approach. However, recent market dynamics, exemplified by Netflix ( NFLX ) and six other stocks, have shown that this strategy may not always produce the expected results. In this article, we'll delve into the reasons why the buy-and-hold strategy is contested, using real-world examples that illuminate its limitations.
The meteoric rise of Netflix:
Netflix has been a stock market darling, wowing investors with its innovative streaming platform. Since its inception, NFLX has grown rapidly, outpacing traditional media companies. Keywords such as "Netflix Stock Price History", "Streaming Industry Growth" and "NFLX Stock Analysis" highlight the attractiveness of this stock to investors.
The Myth of Eternal Growth:
One critical factor that challenges the buy-and-hold strategy is the myth of perpetual growth. Stocks, like any other asset, are subject to market fluctuations. The example of Netflix's journey shows that even giants in the industry face challenges that can lead to sudden declines in share prices. Keywords such as "stock market volatility," "market correction," and "investment risks" highlight the importance of understanding the cyclical nature of markets.
Technical Turbulence:
The technology sector, known for its innovation and rapid growth, can also be a breeding ground for uncertainty. Consider the case of once-high-flying tech companies that later faced setbacks, such as BlackBerry ( BB ) and Nokia ( NOK ). These examples underscore the need for investors to diversify their portfolios and not rely solely on a buy-and-hold approach. Keywords such as "technology stock performance," "investment diversification," and "investment strategy" reflect the need to adapt to changing market dynamics.
Disruption Factor:
Disruption is a constant in modern business, and companies that fail to adapt can see their fortunes plummet. Blockbuster is a shining example of this. Failure to pivot towards digital streaming led to its downfall, while Netflix surged ahead. Investors must be vigilant and constantly evaluate companies' strategies. Keywords such as “business disruption”, “industry transformation” and “adaptive investing” highlight the importance of staying ahead.
Regulatory barriers:
Regulatory issues can have a significant impact on stocks and create uncertainty for investors. Uber and Lyft have faced this reality as legal battles and regulatory changes have affected their operations and stock prices. Keywords such as "regulatory impact on stocks", "legal challenges for companies" and "investing in a regulatory environment" highlight the need to consider external factors beyond financial performance.
Changing consumer behavior:
Consumer behavior is a driver of business success, and a shift in preferences could spell trouble for stocks. The decline of companies like GoPro serves as a reminder that relying solely on past success may not be sustainable. Keywords such as "consumer trends", "changing market demands" and "investment in emerging industries" signal the importance of aligning investments with changing consumer preferences.
Unpredictable economic landscape:
Economic conditions can affect stocks in unpredictable ways. The financial crisis of 2008 showed that even strong companies can suffer during an economic downturn. Keywords such as "impact of an economic downturn," "stock performance during a recession," and "investing in a volatile economy" highlight the need to be prepared for various economic scenarios.
While the buy-and-hold strategy has proven successful for some investors, the experience of Netflix and these six stocks shows its limitations in today's dynamic market environment. Adapting to change, diversifying portfolios and staying informed about market changes are essential steps for investors who want to successfully navigate the complexities of the stock market.
Disclaimer: This article is for informational purposes only and should not be considered financial advice. Investing in stocks involves risks and readers should do their own research or consult a financial professional before making any investment decision.
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