Investors beware! Hunting for buy and hold strategies can offer seasonal advantages and disadvantages.  This occurred to me this weekend while turkey hunting.

No typo.

The investing analogies were not in short supply when you have hours upon hours of sitting perfectly still, hunt after hunt, day after day.  I’ll number the analogies as the my buy and hold story unfolds…

You see, I could’ve asked my hunting guide (#1, most need a guide, AKA Advisor) the best place to hunt for elk or deer, but it wouldn’t matter—it’s TURKEY season.  Ironically, where my guide directed me to hunt, I was in range of elk, deer and turkey—in the same sitting! How unfortunate – deer and elk are out of season (#2, is buy and hold in season? #3, which sectors are within reach, yet not in season?).

Is Buy and Hold, like the elk and the deer, out of season?  I think so.  2013, buy and hold was in season. 2008, not-so-much.  2014? One can only guess.

But why guess?

I didn’t have to guess if I could hunt an elk or deer in turkey season.  I know it’s a really bad idea (illegal…but that’s going a bit far with the buy and hold analogy) to shoot and elk out of season.  2008 is but one example of why buy and hold is always out of season, because one never knows what tomorrow holds in the markets.

And that makes buy and hold a bad proposition.

The 2013 markets that return 30% when you buy and hold an S&P 500 index fund are outlier years – rare finds.  Investors who look for rare finds in the market are gamblers – like the hunter who shoots the elk hoping a game warden isn’t nearby.

While that sounds a bit extreme, investors should know that the name of the “performance game” is to NOT participate in down markets.  If you can avoid the hefty losses (2008) and hit base hits (#4, homeruns in investing are never worth the risk) along the way, you will outperform a buy and hold strategy – AND with more sleep and lower blood pressure.

So, in essence, when Turkey are in season, you hunt Turkey.  So, “what’s in season?” you may ask.

Well, its been said I don’t believe buy and hold is ever in season.  Beyond that, if, for a large portion of your portfolio, you “hunt” in the top performing sectors, you will dramatically increase your chances of putting a turkey on the table, AKA better returns.

Benjamin King’s “The Latent Statistical Structure of Securities Price Changes” holds that 80% of the performance of a stock, is NOT dependent on company selection – that’s right.  That means the company fundamentals usually account for less than 20% of a stock’s price movement. This is the reason a company’s stock price sometimes seems to move independently of the fundamentals!

Most people, however, spend 80% of their time on stock evaluation (picking the name Apple or Microsoft) and only 20% on sector and market evaluation (Bull/Bear market status and favored sectors).

So, to to know “what’s in season” you need to focus more on market evaluation and invest in the top performing sectors. 

I suppose you’re looking for the gravy?  Currently, the market is in Bull Market status. So, green light to be invested in stocks, and the top performing sectors are:

  • Healthcare
  • Building
  • Internet
  • Financials
  • Aerospace.
Now you have the turkey and the gravy.

Some cold hard facts on sector rotation:  Favored sectors compared to Unfavored sectors and the S&P500 Equal Weight Index provided by our friends at Dorsey Wright & Associates.


(RED = BIG Turkey, Blue = Turkey, Green = Out of Season Elk)

I couldn’t authentically end this without sharing some buy and hold strategy advantages, as promised in the title. So here they are:

  1. Low fees if using index mutual funds or ETFs
  2. Ease of management (BUY, and then HOLD) due to passive management style
  3. Nominal tax implications
  4. You always perform as the market performs

But if you’re seeking sleep at night and superior returns with less risk (AKA avoiding the 2008’s), then a tactical approach (the opposite of buy and hold) that incorporates sector rotation is the “hunt” you want.

Advantages of a tactical sector approach:

  1. Low fees if using index mutual funds or ETFs
  2. Ease of management IF you hire the right asset manager (take a look at
  3. Sleep at night and low blood pressure, thanks to active management and owning cash in markets like 2008
  4. Potential to outperform the market with less risk (2008 owning cash=less risk + outperforming the market)
  5. Peace of mind knowing you own the best sectors and not being out invested by your neighbor, friend or co-worker

Don’t be a turkey!  Go find what’s in season.  Gobble Gobble.