[11/7/05] As the head of Berkshire Hathaway, master investor Warren Buffett has said that he expects to "keep permanently our primary holdings." Buffett has never sold a share of Berkshire Hathaway, and he says his performance would have been even better than 21.9% if he'd never sold a single share of any of his investments.
[10/30/05] One of the toughest lessons to learn as a value investor is how often it is absolutely critical to do nothing but sit and wait.
[10/28/05] How long should you wait?
[10/25/05] Admonitions to listen to and emulate the masters by having a long-term focus are everywhere. Warren Buffett has advised investors to act as if their investing careers were limited to a lifetime decision card with just 20 punches on it, and has expounded that Berkshire Hathaway makes investments in businesses, caring not a whit if the market closed for 10 years.
[4/23/05] Ron Baron writes about the Baron Funds time horizon in investing:
‘‘Don’t gamble. Buy some good stock and hold it til it goes up, then sell it. If it don’t go up, don’t buy it.’’ Will Rogers. 1930.
Humorist Will Rogers was ahead of his time with his 1930 market advice which, on reflection, seems to have provided the ‘‘momentum’’ traders of today with their philosophical raison d’etre, i.e., it’s not a big leap, we think, from Will Rogers’ stratagems to buying stocks while they are going up and selling them short while they are falling, a momentum traders’ credo.
But how, in momentum, news reactive, efficient markets, when everyone has access to the same information at the same time, compliments of the Internet, do we think we can purchase growth stocks at attractive prices?
We think it’s principally because we have a different time horizon than most investors. We don’t make investment decisions based upon whether next quarters’ earnings will beat or miss estimates; a contract has been awarded or denied; a drug approved or denied; or monthly same store sales will ‘‘surprise.’’ We’re trying to invest in businesses that we believe have opportunities to grow substantially over the long term and which are often currently investing in their own businesses to achieve that growth. Business capital investments intended to achieve long term growth usually do not produce immediate earnings. In fact, such expenditures usually penalize current earnings and therefore may negatively impact current stock prices. As a result, we often, despite Will Rogers’ exhortations, buy stocks that are falling
or have fallen in price. Many of which have become our most successful investments.
Our strategy, of course, has not always been successful since at times what we have judged to be short term interruptions in growth have proven to be long term problems, or worse, management deficiencies.
In the March 2004 quarterly report, Baron talks about investing in bull markets:
But, how do we find value in a bull market like the one that began in October 2002? We think by identifying trends and ideas that offer businesses significant growth opportunities before most other investors recognize and value those opportunities. By doing our own research, not relying upon others’ advice and
recommendations, and by having a long time horizon we think our shareholders will have a chance to invest in businesses at what we believe are attractive prices and benefit if those businesses grow significantly.
We invest in businesses that we think can benefit from long lasting ‘‘mega-trends’’ like proprietary schools in a technology-based society that provide secondary education which allows you to get and keep your job. Healthcare providers in an aging society when it is obvious that the older you get, the more care you’ll need. Security services in a society afraid of not just terror, but of fraud and criminal behavior. Businesses we think have longer term sustainable competitive advantages that can benefit from the Internet and other scientific advances. Differentiated entertainment for our increasingly affluent society.
These themes are just a few of the growth opportunities we’ve identified and in which we’re trying to invest for the long term.
In addition, we believe long term investors are given many opportunities every year, even during ‘‘normal’’ times, to buy and sell stocks at attractive prices when traders react to short term, unexpected news events which, for the most part are not predictable and are of little, lasting consequence to businesses. We think the terror-induced decline in mid-March is on point.
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