With the typical blue-chip stocks I discuss, the volatility is pretty limited. With the exception of the 2008-2009 Financial Crisis, you don’t really see Coca-Cola, Johnson & Johnson, Colgate-Palmolive, PepsiCo, and Procter & Gamble experience 50% declines in stock price. That is because everyone knows these companies are excellent and the earnings per share increase over almost every three-year rolling period.
I mention this for one reason—even though I write frequently about judging companies based on business performance rather than stock price fluctuations, the typical companies I discuss do not have wild swings in volatility because they are largely followed and most people with a steady pulse are aware of their excellence.
But sometimes, there are examples of companies that have wildly volatile stock prices that do not regularly reflect the true strength of the underlying business performance, and may require you to wear your cowboy hat if you want … Read the rest of this article!