If you are wondering why it is getting harder and harder to make a buck by holding a diversified portfolio of stocks, you are not alone. During the meat of a bull market, most stocks rise in price. As the bull market matures, share price performance begins to thin out. We think the process is taking place right now. Contrast this to market bottoms. At the bottom of the equity market in March of 2009 for example, virtually every stock was undervalued. The baby was indeed thrown out with the bath water. When stocks began to rebound, virtually every stock participated in the rally.
At that time, investors who diversity amongst asset classes like insurance companies, insurance companies, and long-term individual investors, have to have some exposure to equity markets, they tend to stick with the value stocks and blue chips. This caused the share prices of high-quality companies to hold up better. This caused a perverse result. The stocks that rallied the hardest off the bottom were some of the most distressed stocks of mid to low-quality stocks. The stocks looked more like out of the money options than in the money equities. There were stocks of financial companies like Fifth Third Bank. It's stock bottomed at $0.86 on 20-Feb-2009, jumping to over $10 just a few months later.
