BDX was first mentioned here:http://wp.me/p1PgpH-1c6
Reader: “Should I buy BDX?”
Reply: The penalty for asking this question-the gauntlet: http://www.youtube.com/watch?v=j1BoNgCR8NU
You would be insulted if I told you whom to marry. Why should investing be any different? You have to think for yourself and apply principles through your own skills, interests and the opportunities in front of you today and (perhaps better) tomorrow.
Don’t end up like this (click on 4o second mark): http://www.youtube.com/watch?v=fPV2L2CGWdQ.
Lesson
The lesson with BDX is that sometimes the stable, slow growth franchises with management that has the proper capital allocation plan might be able to generate above market returns for those with weak stomachs.
This is not an earth shattering insight. Look below at BDX compared to the S&P 500. Note the much lower price movement down in 2009 and up in 2009-2012. the company’s results are much more stable and better than the average company.
Look at page 3 in the BDX annual report, BD_2011ar. BDX’s stock price returned 3.66% compounded annually over a five-year period from 2006 compared to the S&P 500. Will that condition continue? No one can know with 100% certainty, but I am betting my largest risk is boredom.
Note this Morningstar Video on market expectations: http://www.morningstar.com/cover/videoCenter.aspx?id=566021
Don’t fear nor expect too much. But if you can find an investment with a larger discount to your estimate of intrinsic value or, more likely, you require higher returns, then avoid BDX.
Asking ME whether YOU should buy is absurd. What YOU need to do is develop an investment process that will help you search, find, value and size the best portfolio for yourself. No one can do it for you. It’s a lonely but interesting road. Embrace it.
John,
Great response. In general, if someone asks me “Should I do X?” when it comes to investing, my response is “Who are you?”
What I mean by that is, what kind of personality do you have? What are your goals? What is your financial position? Time horizon? Etc. I try to get them thinking about themselves and whether it is an investment that compliments a person of their unique traits.
Then I scold them like you did.
Even if you did give them advice that suits the individual, how would they know when to sell. Perhaps more importantly, if the stock price drops or bad news comes out, they’ll have no basis to decide whether to hold or sell.
Good point, Scott. Also, why not learn from your OWN mistakes rather than following someone else’s errors. At least you build up your knowledge and character for the next opportunity.