Netflix (NFLX) and 6 Stocks that Show You Why the Buy & Hold Strategy Doesn’t Work
Written by
Sean Fisher, AI Editor
Edited by
Sean Fisher
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The buy and hold strategy is a popular investment strategy where investors purchase stocks with the intent to hold them for an extended period, regardless of market volatility.
While this strategy has its merits, it’s not a one-size-fits-all approach. Here are seven stocks, including Netflix (NFLX), that illustrate why the buy and hold strategy may not always be the best approach.
1. Netflix (NFLX)
Netflix has been one of the top-performing stocks in 2023, with its stock price surging by 48.5%. However, questions about the sustainability of its business model and concerns about “too little visibility” in the company’s underlying business, as highlighted by Goldman Sachs analyst Eric Sheridan, raise doubts about whether NFLX is a solid long-term investment. With potential profits on the table, investors might consider cashing in rather than holding onto the stock.
2. Pfizer (PFE)
Pfizer, a biopharmaceutical giant, recently faced a setback with the termination of its clinical development of an obesity drug. The news sent the stock tumbling down by 6.9%, erasing gains made in previous months. Although Pfizer has a long-term outlook with the potential acquisition of Seagen, the payoff for this investment is years away. This illustrates the need to reevaluate holding a stock when short-term events negatively impact its value.
3. Alcoa (AA)
Alcoa, a leading aluminum producer, is another example of a stock that might not be suitable for a buy and hold strategy. After reaching a peak in 2021, the stock has dropped 64% due to declining aluminum prices and negative earnings. A recent analyst downgrade from Carlos De Alba of Morgan Stanley adds to the bearish outlook on the stock. With no immediate signs of recovery, investors may want to consider other options.
4. Hershey’s (HSY)
Hershey’s stock is down 9.7% since hitting an all-time high in May. While the recent decline could be attributed to insider selling, the company faces other challenges that make it a less attractive long-term investment. With more than 50% of the company’s shares held by institutional investors and a forward P/E ratio of around 26x, the stock appears overvalued. Rising commodity and transportation costs could also impact earnings negatively.
5. Walt Disney (DIS)
Disney has faced a tumultuous year, with its stock once again trading near pandemic lows. Despite aggressive cost-cutting measures and a promising Disney+ streaming business, the company faces several challenges. Disney+ lost four million subscribers in the recent quarter, and potential economic headwinds could negatively impact the company’s theme parks. Without a dividend to attract shareholders and unclear economic prospects, holding onto DIS stock may not be the best decision.
6. Anheuser-Busch (BUD)
Anheuser-Busch has been grappling with declining sales of its Bud Light brand and job losses at glass bottle suppliers due to reduced production. The company’s frequent marketing campaigns have failed to reverse the trend, putting further pressure on the stock. Although Bud Light remains the official light beer of the NFL, shareholders may be questioning whether holding onto the stock is the right move.
7. 3M (MMM)
3M is facing multiple lawsuits, one related to earplugs used by the U.S. military and another involving the use of “forever chemicals.” While a settlement for the latter lawsuit has been reached, the company still has to address the earplug lawsuit. To mitigate the impact on earnings, 3M may consider cutting its dividend, which would likely disappoint investors. With the stock already trading at 5-year lows, it might be time for investors to reassess their position.
While the buy and hold strategy has its merits, it’s crucial for investors to regularly review their holdings and make informed decisions based on current market conditions and company-specific factors. These seven stocks illustrate the importance of being proactive and responsive to changing circumstances in the investment world.
Editor's note: This article was produced via automated technology and then fine-tuned and verified for accuracy by a member of GOBankingRates' editorial team.
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