Daily Stock Prices Are Completely Irrelevant

The day-to-day performance of stocks on the rise or fall is nearly indistinguishable.

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The Motley Fool

“I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.”

— Warren Buffett

Most investors have heard or seen this quote from the great Warren Buffett, but very few actually listen and heed his advice.

The availability of daily stock prices has drastically changed with the introduction of the Internet. What once was available mainly via newspapers has now become an inescapable and always-present reminder of one’s fluctuating portfolio.

Investors check stock quotes on everything from their online brokerages account to their jam-packed Twitter feeds. We’ve reached a point where one almost has to go out of his or her way not to see how their favourite stock or the market in general performed on a certain day.

To highlight the insignificance that daily fluctuations have on a long-term holding, let’s take a look two stocks that did very well in 2012, and two that didn’t.

Gildan Activewear (TSX:GIL,NYSE:GIL) climbed 89.6% in calendar 2012 but if all you saw was the chart below, you probably wouldn’t guess that such a big return was achieved.  Gildan’s stock was only up on 55% of the trading days in 2012.  Get ready to see this pattern repeated in all of our examples.

Gildan

 

 

 

 

 

 

Thanks to a return of 63.4% in 2012, Catamaran (TSX:SXC) shareholders had a good year.  However, if they would have been watching Catamaran on a day to day basis, they would have seen the shares only go up 52.4% of the time.

Catamaran

 

 

 

 

 

 

 

Penn West (TSX:PWT) shares fell 46.5% in 2012, which is somewhat remarkable given the stock was only down on 52% of the trading days.

Penn West

 

 

 

 

 

 

 

And finally, Enerplus (TSX:ERF) fell 50.1% in 2012 although in terms of day to day trading, the stock was up nearly as often as it was down.

Enerplus

 

 

 

 

 

 

 

Eye-catching headlines and daily gyrations are fun to follow, but that’s about it.  To rise above the noise, when you’re making an investment, think like Buffet and assume you won’t be able to sell it for five years.  You’re likely to think differently about making that investment if it’s framed in this context.

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The Motley Fool has no positions in the stocks mentioned above.

A version of this article, authored by David Hanson, originally appeared on Fool.com

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

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