Past stock performance no guarantee of future returns

Q: Dollar Tree dltr and Netflix nflx seem to be companies that are faring well in the current environment. Does that mean they will be leaders when the economy picks up?

A: There's no question there have been some stocks that have seemingly defied the bear market.

And two of the stocks you mention, Dollar Tree and Netflix are good examples of stocks that have risen in the face of the downturn. Netflix, for instance, is up more than 55% this year and Dollar Tree is up about 4%, even as the Standard & Poor's 500 is down about 3% during the same time.

And over the past three years, Netflix is up almost 70%, Dollar Tree about 60%. During that time, the S&P is down more than 30%.

Does that mean past trends will continue? Unfortunately, it's not that easy. If that were the case, you could get a list of the best stocks of the previous year, buy them and make lots of money. There are many examples of winning stocks one year becoming bum investments the next.

That's not to say I'm predicting Netflix and Dollar Tree will lose their mojo. All I'm suggesting is to remember that past performance doesn't mean future profit for investors.

Matt Krantz is a financial markets reporter at USA TODAY and author of Investing Online for Dummies. He answers a different reader question every weekday in his Ask Matt column at money.usatoday.com. To submit a question, e-mail Matt at mkrantz@usatoday.com. Click here to see previous Ask Matt columns.

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