When it comes to investing in the stock market, newbies are often cautioned against trading too often. This is good advice. Many investors end up badly trailing the returns on any market index you choose simply because they are terrible at timing. Jumping out of stocks when they are low, buying into them when they are high. Chasing winners, selling out “before” a crash, and so on eat into investor returns, but is buying and holding a good investment strategy?
Warren Buffett Buy and Hold Strategy
Once upon a time, Warren Buffett was quoted as saying that his favorite holding period for investments was “forever.” Of course, that was taken a bit out of context and leaves out the fact that in many ways, when Warren Buffett and Berkshire Hathaway want to hold an investment forever, they buy the whole company. Buffet’s company bought Geico, Burlington Northern, Dairy Queen and numerous others including my personal favorite Acme Brick Company.
What Warren Buffett actually advises to anyone who asks how to invest is to buy an S&P 500 index fund and leave your money there forever. This is actually very good advice. Few investors beat the S&P500 on a consistent basis. In fact, most mutual funds do not beat the S&P 500 over a period of few years or more, and it’s even worse than it seems as the worst mutual funds are silently swept into “successful” mutual funds to hide their track records in the wreckage of poor memory.
Of course, just buy the S&P500 is no way to sell magazines, financial products, financial services, financial plans, mutual funds, ETFs, or even brokerage accounts. Even if it were, most people WANT to invest some other way. They want to believe that they are the exception to the rule. They want to believe that there is a secret investing strategy that will make them richer, faster. And so it goes.
But every once and a while you want to throw Warren Buffett and his believers a bone. So, in its August 2000 issue of Fortune Magazine, the company published an article titled 10 Stocks to Last the Decade. Not surprisingly, that article doesn’t seem to show up in any online searches, but the article Kiplinger wrote about that article in 2010 is still online, so we get to have some fun, without figuring out how to search old magazines at the library. (I’m doing that next. This article was born of research for a freelance investing article I’m working on. But, when life gives you the lemons for a sweet blog post, write the lemonade… or something.)
Not All Buy and Hold Is Bad
Now, not all buy and hold means buy and hold forever, and I am not advocating fast, frequent trading. I say as often as my fingers are willing to type that the best investing strategy for the long term is a diversified portfolio built to your time frame and risk tolerance with annual or semi-annual rebalancing. This is 100% true. Always. Lick it. Stamp it.
But, today, we come to mock buy and forget. Truth be told, buy and forget works wonderfully for a diversified portfolio. When I was a financial planner, as a percentage, the people who opened their 401k accounts then completely forgot about them or ignored them altogether ended up with far more money than people who “did something,” with their 401k plan investments. It turns out that for all their faults, a 401k plan with a handful of diversified options, built up over 30 years via modest contributions (and even better some matching) ends up producing a sizable nest egg for precisely the reasons that Warren Buffett says to invest in the index. When you forget about it, you can’t mess it up. Grab any software, website, or program you like, and graph 30 years of the S&P 500 and you’ll see why. Not even so-called “lost decades” matter much over a 30-year period.
The fatal flaw in Fortune’s article lies in the title. Ten stocks. Just ten. Ten is not diversified and as it turns out, winners today aren’t always winners tomorrow, and especially in the early 2000s, fraud is always a possibility.
Forget Buy and Forget
So, what were the 10 stocks to last the decade, and why was there such spectacular failure?
First, as we just pointed out above, 10 stocks is not diversified enough. Even great companies can slip up. Even great companies with great products and execution can find themselves left behind by a changing world. As Danny Devito says in Other People’s Money, “The last company making buggy whips probably made the best damn buggy whip you ever saw.”
Second, as a financial publication, Fortune needs to show its readers a little something. After all, if they just do the same thing as everyone else or repeat what is already common knowledge why would you buy and read Fortune. There is a scene in the show Billions where an analyst says that he thinks Apple might be a good investment. Axe mocks him by saying he doubts anyone is paying them huge fees for a recommendation in Apple. Fortune could have recommended GE, 3M, Coca-Cola, and so on, but that isn’t extra information, or inside knowledge, or whatever.
Third, even when picking a set it and forget it portfolio, the writers at Fortune couldn’t resist loading up on tech. The article decided to recommend two companies in four categories, finance, media, technology, and telecommunications. If you’re paying attention and processing information, and not just reading it might strike you that three of the four categories are more or less tech. Here is your final diversification plug. Where is manufacturing, medical, or services?
Fourth, this isn’t really fair. If you’ve been around for more than one bull market, you may remember that 2000 to 2010 wasn’t necessarily the best days of the stock market. The S&P 500 return for the 2000 to 2010 decade was actually -9.4%. Even so, there were still some spectacular failures contained in this list of buy and hold forever stocks.
What Were the Stocks to Invest in for a Decade?
Now that we’ve had our veggies in the form of a bit of literary financial analysis, let’s have our dessert.
In the Finance category, Fortune picked Charles Schwab and Morgan Stanley.
In the Media category, they picked Viacom and Univision.
In the Technology category, they picked Broadcom and Oracle.
In the Telecommunications category, they picked Nokia and Nortel.
Then, to round it out, they picked Genentech (medical) and Enron (energy).
So, the 10 Stocks to Last a Decade were:
- Broadcom
- Charles Schwab
- Enron
- Genentech
- Morgan Stanley
- Nokia
- Nortel
- Univsion
- Viacom
Ouch.
Enron flamed out in an account fraud scandal so big it took Arthur Anderson with it. Going to zero so fast not many had time to get out without dramatic losses. 2010 would have been way WAY too late.
Morgan Stanely (MS) would, like all other Wall Street firms, get crushed in the housing market crash of its own creation. Trading at over $100 a share when the article was published and $30 per share when the decade ended. Holding a little over two decades would have got you back to even.
Nokia was one of the biggest (maybe the biggest) cellphone manufacturer when Fortune recommended it as a stock so strong and dominant that it would obviously be a great investment for the next decade. Class, can anyone tell us what happened in 2007 that shattered Nokia’s world? Anyone? Apple and Steve Jobs happened when they released the iPhone in 2007. At the same time Blackberry was eating up market share for the non-believers in touchscreens. Microsoft bought Nokia’s mobile phone business in 2014, long after 2010 would have been a terrible time to still own Nokia stock.
Broadcom: If you’re young enough you might know Broadcom as a solid tech company operating today. Bzzt. Sorry. Thanks for playing. Fortune was talking about 2000 Broadcom (BRCM not AVGO). This one might have been a little too much buzz for a more thoughtful article. Broadcom only became a public company two years earlier in 1998 and its main business was buying other companies. That can be a tough business especially when your company’s main competitor is Qualcomm. This all proved to be moot, however, when that short track record turned out to hide “back-dated stock options.” An investigation would eventually lead to indictments and $2.24 billion worth of expenses, oh and it turns out overstating income and understating losses. A judge dismissed charges against company executives not because they weren’t true, but because of “witness intimidation.” By then, the cat was already out of the bag. Broadcom got bought out and made part of AVGO in 2015.
Univsion: In the late 1990s and early 2000s, there was this wave of research into things like bellwether states, and demographics, and so on and so forth. This most certainly played into the selection of Univision with the prevailing theory that the Hispanic population was booming and therefore, anything aimed at them was easy money. But, where there is easy money, there is competition. Telemundo began bidding on the same shows and stars as Univision. Win some lose some, but 50% of a booming market isn’t the same. Throw in some executive feuding, and this definitely wasn’t an investment to take your eyes off of.
Nortel: Man, was this stock a swing and a miss for a list like this. I don’t know when exactly this article was written, but Nortel’s peak was in September 2000, one month after the article was published. Its stock fell from $124 to $0.47 ($CDN) just two years later. The company finally filed for bankruptcy in 2009, making it TWO OF TEN stocks on this list to be worth zero after a decade.
Alright, what’s left?
Genentech: Genentech was a company when I was a financial advisor in the early 2000s. It had like two drugs that were “cancer cures” or treatments. Back then I didn’t know enough about cancer to know or care much about the different kinds. What I do remember was its clever DNA stock symbol and several of my clients made money investing in it (some with me, and some on their own). Then it gets bought out. Back in 1990 Roche bought a majority state in Genentech. In those days, you left some of the company behind so you could take advantage of a huge stock price move if they discovered a miracle drug or had amazing trials. In 2006, Genentech bought Tanox which I don’t remember at all, and then in 2009 Roche bought out the rest of Genentech which I vaguely remember. According to the Kiplinger article Genentech was the only stock that was profitable as of 2010. I’ll have to take their word for it, because another company picked up the DNA ticker symbol making it hard to track down historic stock pricing.
Oracle (ORCL): This article wasn’t the only buy these stocks forever kind of article that came out. I remember several and maybe I’ll go look up some of those later. I also remember that those kinds of articles frequently had two “forever” companies in them, Cisco (CSCO) and Oracle. Cisco was the dominant networking provider of the day and Oracle was the dominant database provider of the day. Not only dominant but the only respected database provider. Microsoft had SQL Server but among techies and database administrators, Oracle was the real database, and SQL Server was a toy. (Fun story – During my systems administrator days I sat in a meeting where they discussed among other things where to put a new database that was needed. Without blinking, all the DBAs around the table said Oracle. Then, someone said we need it by next month, or something like that. And, without blinking, they all changed their answer to SQL Server.) — My guess is that Oracle stock was down at this point more as a result of the recession that came from the internet bubble popping. It was already on its way back up ($32 from $42 10-years earlier). But, if it wasn’t knocked off its pedestal yet, it would be soon, not because of Microsoft or any other corporate competitor but because of MySQL, an open-source relational database. You see, Oracle was as big of a bully as possible when it came to licensing and fees. Even touching Oracle cost a company millions. You can’t run a startup by dumping all of your money into your database licensing fees. Open-source Linux servers plus open-source database software and you were off and running. Why switch? Oracle wasn’t any better or faster and you were just paying millions of dollars for technology handcuffs. A few more years and NoSQL would emerge as both better, and open source. All of that said, Oracle is still a publicly traded company today.
Charles Schwab (SCHW) – The last company on the list is Charles Schwab. Like Oracle, they are still around as a publicly traded company. They were a discount broker back then, and they are discount brokers now. Unlike some of the other companies on this list they were never overwhelmed by the markets or technologies. They were likely added to this list thanks to the rise of internet trading and investing. Ironically, 2000 was the year the internet bubble burst and many of those “investors” and day traders were about to disappear back into their 401(k)s and mutual funds after getting clobbered, especially in over-inflated, or even fraudulent tech names. Back in 2000 everybody had “a friend’s cousin” who was day trading and making hundreds of thousands of dollars from their home over dialup internet. Like most urban legends it wasn’t really true for most people. Unfortunately for its spot on this list, SCHW was down 53% in 2010 compared to 12.5% for the S&P 500. You would have to hold until the fall of 2016 to break even if you bought when this list came out.
Stock Picking Advice Is Often Very Wrong
Whenever I have time I try and look at previous investing advice whether its from companies, financial websites, or analysts. There is never enough time to properly write up every so-called guru out there who “called” whatever event they have chosen to cherry pick from their career in order to establish their so-called credibility. My all time favorite was Abby Joseph Cohen who became popular by being the only analyst who “correctly” called the ever increasing stock bubble without fail, only to never call it popping, nor ever calling a down year after that in her enitre career. We’ve looked at Jeremy Grantham, and I still have the book around here where the Motley Fool was two guys who had this amazing stock picking, you don’t need any professionals, reputation all pinned directly on having bought and held AOL stock all the way up the stock bubble…. and all the way down when the website that had published numerous stock portfolio recommendations suddenly decided that they wouldn’t do that anymore because the point was to do it yourself anyway. Their increasingly terrible history laid bare had nothing to do with it, of course. (Ironically, the Motley Fool website will once again gladly pick stocks and even charge you money to see its super-amazing, no public track record, picks.)
The reality, as ever, is that picking stocks is difficult because picking the future is difficult. Do you think technical analysis showed an internet bubble ready to pop? Do you think any analyst correctly predicted the erratic events of China’s economy? Terrorist attacks? Political changes? Here at Finance Gourmet we know the answer after decades of hanging around the markets and its press.
As always, the best strategy for long-term investing is to buy and hold a diversified portfolio with regular rebalancing and continuous investing. Diversification prevents you from being wiped out by a single stock like Enron, while regular rebalancing keeps you from getting wiped out by a sector or portion of the economy or markets. Dollar cost averaging plus compound interest are the greatest allies of any investor.
If you are looking to invest check out my: Stash vs Acorns vs Robinhood vs Betterment vs Wealthfront article.
Originally published 01/11/2025 on FinanceGourmet.com
About the Author
Brian is a former Certified Financial Planner and current financial writer with decades of experience in the investing, finance, and banking industries. He currently owns no positions in any of the stocks mentioned above, even the ones that still exist today. However, that can change at any time without notice. This article may not be updated frequently (or ever) so information, especially any stock prices or news events, may no longer be current. Always do your own research and consult your financial and tax professionals. This is not a recommendation to buy or sell securities. Brian is no longer a financial advisor and does not hold himself out to be one.