Ask Colin

Why is it that the leaders in one bull market rarely do as well in the next?

I have never seen any research on this, so I can only take some guesses based on observation:

1. Some of them fail completely, so they are not even around for the next one.

2. Some get big, fat and lazy in a bull market and get into big trouble like the first group, but survive. The turnaround can take a long time.

3. Many are children of a growth industry that is mature by the time the next bull market comes along.

4. Others have grown from small companies to very large ones. Big companies grow slower than small companies.

5. Some retain market darling status and do not become very cheap in a bear market. This limits their potential in the next bull market, because they are already expensive.

Some of these guesses may be right, because it is an easy observation to make. Of course, there will also be exceptions. Life is never simple.