I read a Peanuts comic many years ago where Linus says to Charlie Brown, “I’ve figured out the secret of life. I went to the doctor with a cough. The little boy in the next room also had a cough. The doctor went into his room and told him he had pneumonia and would have to go into the hospital. But he came in my room and told me I just had a cold. The secret of life Charlie Brown is to be in the right room”.
And sometimes we feel that way, as long as we’re in the right room everything will be ok. But like with Linus, we’re fooled sometimes by thinking the room or category makes a difference. A good example is when people talk about ‘growth’ versus ‘value’ stocks. I just picked two stocks at random. A typical growth stock (Intel) and a typical value stock (Caterpillar Tractor). High tech growth versus stodgy farm equipment. We want to be in the growth room don’t we? Not over the last 10 years we don’t (I’ve intentionally excluded the internet bubble so this wouldn’t be too silly). Since January of 2001 Intel has fluctuated between $38 and $12, with the high in January of 2001. Currently it’s at $24. Sounds like a stodgy value stock. On the other hand, Caterpillar went from around $17 in January of 2001 to $72 where it is today, not too far off it’s all time high of $85 that it hit in 2008. Sounds like a growth stock.
TV analysts and newsletter writers love to put things in categories, like ‘growth’ or ‘value’. But like most things in life, it’s rarely that simple. Keep this in mind when you are buying a stock or choosing a ‘value’ or ‘growth’ mutual fund. Linus was unfortunately wrong. The secret to success is the individual, whether it’s a stock or a person’s health, not the room or category it gets put into.