Here is an illustration of what Buy and Hold could result in.
LTR hodlers who bought 4 years ago at 45.5c and holding to this very day would just be making 25% over 4 years.
Their decision not to sell to Gina at $3-3.15 proved very costly. They should have sold the stock at $3 then because had the takeover been successful, they would not get any higher than $3, but if it didn't, anyone should have known that the stock would fall as the price was underpinned by a TO price. And they could sell the stock first to decide to buy back at lower price if the deal failed.
Those who did and ploughed the entirety of their proceeds into AUD Gold would have walked away today with a handsome $930k on just $100k of investment. Contrast the value of $931k against $25k under Buy and Hold.
The same story with Droneshield (DRO). When DRO started falling from its peak, it was on the back of revelation expressing scepticism over its real growth rate. Today its price is at 76c, a far cry from a possible sale price of $1.73, being 1/3 off from its peak, and then redeploy into AUD Gold. The difference in approaches would be $340k over Buy and Hold.
Moral of the story:
1. Buy and Holding forever with no due regard to macro and micro developments is always perilous - complete faith is utter disaster, stock is not a religion.
2. Investing does not mean holding forever and stock price does not have to assuredly rise with time, which is what common investors tend and want to believe.
3. Holding involves opportunity costs i.e if you are stuck with a dog stock not wanting to exit and waiting until it becomes extreme pain to exit, you lost the opportunity to re-invest proceeds into a better investment opportunity
4. Understand this: both LTR and DRO were not cashflow generators, there are inherent risks, so while Buy and Hold can work well with the CBAs of the world, both stocks were far from being a CBA. Buffett's Buy and Hold applies to blue chip cashflow generators with well established moat.
5. When a stock is rallying pretty much on hype and momentum, at some point, the exuberance will fizzle out, don't be the last to leave when the lights are switched off
6. Investing in a speculative stock is very different from investing in real estate, the returns can be monstrous over a short term but can lose all of it over a longer term.
