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MARKET COMMENT
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The Motley Fool's Long-Term Buy and Hold (LTB&H) mantra of investing in quality companies appears a little outmoded these days. Comments such as "choosing a very 'safe' and successful company such as Vodafone(LSE: VOD) can damage your capital very seriously" have become a common occurrence on the Foolish discussion boards. Few can deny that Vodafone is a successful company. Nor would anybody deny that Vodafone shares have had a tough time since their 399p peak in 2000. But those who point to the TMT bubble and criticise the LTB&H approach ignore a two critical parts of the strategy: value and change. Nobody ever said buying great companies always equated to great portfolio gains. If many great things are expected of a company, its future performance may already be priced into the shares. At their peak, Vodafone shares traded on a forward price to earnings ratio of around 100. Undoubtedly, plenty of earnings growth was already factored into Vodafone's then share price. All businesses undergo change too, with certain industries experiencing more change in product design and customer demand than others. Sometimes, the company you find yourself part owning today may not be the same one you bought into a few years ago. However, there's no rule that says LTB&H investors have to keep investing in a business whose industry position has fundamentally altered for the worse. Marconi (LSE: MONI) anyone? Far better instead to get involved in companies whose products generate proven custom year after year. Overall, investors shouldn't focus on the TMT collapse for their scepticism of the LTB&H approach. The downfall of many highly rated companies whose products or services were subject to rapid change should not be taken as conclusive proof against the strategy. It's fair to say that true LTB&H investors would never have got involved in the tech boom in the first place. While there are no guarantees with any share investment, looking for a great -- and stable -- company, whose share price doesn't reflect its long-term prospects, is a better place to start than most. More: Investing Strategies discussion board A version of this article was published in January 2002.