Buy and hold strategy also suffers from market maturity. When Buffet started value investing, lots of factors were not baked into the pricing of companies at that time. FCF and Dividends were the supreme indicators. Lasting competitive edge, brand recognition, redeploying cash flow into business investment strategies, commodity vs value added products, and optionalities open to the companies; they were not priced into the market at all. As investors matured and new models of Fair value calculations came out, companies began getting closer to their true value much faster.
Today, rising stars and sectoral expansions are identified much faster. Information accessibility adds a faster discovery of price and prospects. Technical indicators squeeze out trading noise and bubbles of accumulations, social network propagates new datapoints and hidden gems much faster, options and HFT eke out the last juices of mispricing.
Today, investing edge has become one of reading the euphoria or negativity surrounding a stock/sector and finding pockets where pendulum is swinging too much. That arbitrage is your alpha. Pick up trends faster than market by curating right signals and discarding the noise. Buying too late or holding too long gets punished.
Atleast that’s where my head is at. I’m sure market will teach me all the ways I’m wrong.
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