...the essence in the nature of a commodity is that its price never stays up indefinitely- so why hold a commodity stock through the boom and bust, its like making 100% and then losing -50% back and back to square one. And why buy when the commodity is going through the bust cycle?
..that's exactly what happened to FMG. It doubled from Oct 2022 at $14.70 to hit $29.88 on 2 Jan 2024 but since then it has almost halved to $15.03, and the entire gain from Oct 2022-Jan 2024 is almost gone (except for dividends). Held over the past 5 years, it has delivered 6%+dividends. Not shabby with high dividend yield but nothing still beats that 100% capital gain over just 14 months!
..Buy and Hold for dividends are for those who don't recognise the cyclicality of commodity based stocks.
All time view FMG Stock Price and Chart — ASX:FMG — TradingView
...understand CYCLICALITY ; high prices attract higher output/supply which kills high prices.
...now with lower price of coffee beans, why isn't a cuppa cheaper to buy? Because vendors don't lower prices after they increased them, they would raise prices in response to higher input costs but does nothing when costs comes down.
...inflation does not measure the cumulative price increase, but the increase or difference in price relative to the prior period (month or year). Consumers get no relief as higher prices become the base for the next price increase.
...the relief comes with discounts/sales, so a clever consumer must know when to buy and when not to.
