In January 2012, I wrote an article outlining a number of stocks that investors typically regard as blue chips, that had seen their share price plunge by more than 12% and as much as 41% from the 52-week highs.
If readers had constructed a portfolio of those ten stocks in early 2012, reinvest all the dividends back into shares, their returns would well and truly have smashed the index as the table below shows.
Here's how that portfolio would have performed, compared to the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO).
| Company | Share Price | Total return (incl dividends) |
| QBE Insurance Group Ltd (ASX: QBE) | $11.15 | 15.4% |
| BHP Billiton Limited (ASX: BHP) | $25.30 | -12.7% |
| Computershare Limited (ASX: CPU) | $11.55 | 72.8% |
| Origin Energy Ltd (ASX: ORG) | $5.95 | -39.5% |
| Westpac Banking Corp (ASX: WBC) | $31.19 | 105.6% |
| CSL Limited (ASX: CSL) | $103.05 | 262.3% |
| Australia and New Zealand Banking Group (ASX: ANZ) | $27.94 | 77.4% |
| Worleyparsons Limited (ASX: WOR) | $9.21 | -60.2% |
| Sonic Healthcare Limited (ASX: SHL) | $21.77 | 134.3% |
| Woolworths Limited (ASX: WOW) | $23.32 | 16.0% |
| Average | 57.1% | |
| S&P/ASX 200 | 26.8% | |
| Outperformance | 30.3% |
Source: S&P Global Markets Intelligence, Google Finance
However, I should also point out that several stocks that were regarded as 'blue chips' in 2012 are far from what I would call blue chips today. You can add Worleyparsons, Origin Energy, Computershare and BHP Billiton to that list.
Origin and BHP suffered as oil and iron ore prices were hammered. Worleyparsons is highly dependent on the oil and gas sector, so has suffered a similar fate. In February 2012, I also warned that the market darling was overvalued and that I would definitely be avoiding it.
And so the portfolio overall has thrashed the market despite the big losses from Worleyparsons and Origin, and that half the portfolio failed to beat the market's 26.8% return.
The lesson is that the death of buy and hold investing has been greatly exaggerated. As long as investors stick to quality companies, and invest for the long term, we can beat the market.
