Some time ago the author received the following question, ' Sir, I heard Warren Buffett (WB) that if you already buy stocks then never sold again/on hold forever. Similarly, Mr. Lo Hong Kheng, who is said to be able to hold the stock until 7 years. But Mr. Firm myself, I notice you hold the longest stock just to 1 – 2 years only, the rest just hold a couple of months, and there are also purchased shares because the company paid dividends, then later sold after dividennya dapet. Could you please explained this problem Sir? '
Well, regarding this question the possibility of representing the temen-temen questions from other investors, then all my bikinkan just the article.
So, Yep, the author himself when first used to read-read about methods of value investing, especially about how his investment Warren Buffett, then one of the fundamental differences between he as value investors with stock traders/investors most related is the holding period, aka how long he holds a stake, where if other investors tend to play short, then long term CoStar WB. And the definition of ' long ' here is really puanjaaang, i.e. between 5 years to forever. One quote WB was, ' my favorite holding period is forever ', which indicates that if Berkshire Hathaway (BRK) buy certain shares, then such shares will not be sold again until whenever.
Two Weaknesses
And when, as a novice, the author then tried to apply the WB investment way. But it takes long before I then find at least two weaknesses of the strategy of ' holding his WB forever '. First, the decision to keep hold of shares will be a bad decision in a bear market. The author still remember, in May 2010, I first became acquainted with the market crash, in which JCI drop from 2.971 to Muscovy duck at 2.501, or 16% drop in just a month, and when it's there are many stocks that drop his up to 20 – 30%.
And although in June his direct market recovered again, where good stocks on the rise again, but from the experience of the writer's market correction immediately realized that if I buy certain shares in December 2007, and then stick to hold his Although the market experienced a crash much worse in 2008, then it could be until the year 2010, or three years later, the stocks that I am holding still new just turnover , new alias up again to the position of the price purchasing. So in this case even though his position is indeed not a loss, but we are so lost time 3 years which is very very valuable, it is also assuming we do not panic when a crisis occurs, aka strong enough mentally to continue to hold the shares including When the crisis reached the lowest point, in October 2008.
Outside the correction factors market/market crash that could happen at any time, about two years later writers realized one more other factors that require someone to sell their shares (so not so hold the ' forever '), i.e. If the company suffers a fundamental change. Yup, in the year 2011, coal stocks experienced a tremendous increase in line with the performance of issuers that are very good, but in the years 2012-his profits began to fall, and is ever come into down. For example, Natural Resource Indonesia (KKGI), where its shares rose from 1.000-translucent 8.000 (before stocksplit) in early 2012. But a quarter of 2012, the company I registered a decline in profits, or in other words the fundamental changes. And as it turns out, along with the coal price drop when it's KKGI, the performance never recovered again until the year 2016. While its shares? Well, the drop of 8.000-an earlier to the U.S. low u.s. 500 's (again, prior to stocksplit), or jeblok more than 90 percent! So can you imagine if someone buys this KKGI in the year 2012, and decided to ' hold forever '? Because the fact is, although by mid-2016 stock KKGI yesterday started up again, but until now the price is still very far away to reach its highest point in the year 2012.
It was the first market correction factor related, and fundamental changes to issuers. Second, the author then also realize that the strategy of holding ' forever ' does not produce an optimal investment performance. For example, at the end of the Decade of the 1980 's, the WB began to accumulate shares of Coca Cola (KO), until finally the BRK holds a KO over US $1 billion in 1990, and when it is set at level US KO $4 per share and continue to rise. Until in the year 1998, KO was already in the level above US $40, or up 10 times the purchase price of the WB. After that KO began to fall, and continued to go down to live US $20 in the year 2004 (the author hasn't been checks because of difficult search data, but the possibility in the years that Coca Cola experience decreased performance). And it was only on this day, or almost 20 years since the stock reached its highest point in the KNOCKOUT of the year 1998, the stock rose to as low as KO US $40 's.
The stock price of Coca Cola from the years 1975 to present. Note that the price of its shares now is not much different than the rest of the year 1998. Source: Google.
So, yes, in the end a huge profit from a fixed WB KO, but profit 1.000% within the next 30 years is almost certainly not a satisfactory investment performance. Indeed, the biggest advantage of WB KO not only from the increase in its stock price, but also from dividends, which currently receives dividends from BRK KO about US $500 – 600 million per year, but still the total profit is not too large, once again, if considering the holding period-avail in his old one. If WB sell KO in 1998, then when it's already generating a profit 10 times, and he was able to reinvest their money in other stocks to produce a profit that could be achieved 10 times more in the next 10 years (so the total WB 100 fold cuan in 20 years). But still, that's not what he was doing.
' Holding Period ' Buffett in 1960-70s
Curious, the author then learn more about how investment WB, whether he is from the beginning of his career as an investor has already implemented a strategy of holding forever, or it used to be his strategy is different again. Daaaan turns in the year 1960, the WB has absolutely never buy stock to then ' forever ', but rather held for sale again after some time, certainly at a higher price. If you read-read annual letter WB since he was managing the Buffett Partnership, then there is a lot of the stocks mentioned WB bought at bargain prices and then resold at a price that indeed should. Call it Sanborn Map, Dempster Mill, until the HKC Dept. Store. Including when WARNER BROS. bought the shares of BRK in the year 1962, the goal was to later sell at a price that (expected) higher (but being a little ' accident ', Berkshire Hathaway has finally fixed on-hold WB to present, though the fixed assets the company already dilego all/stay the rest of the name of the company as the holding company). In 1960 's, WB average selling back its stake after 1-2 years, or 3 years old at most, but there is also a direct stock he had sold back in the same year (so hold him only a few months).
After realizing the fact above, including after read-read (and practicing) more about value investing, then the author then understand that it is not investing, value ' buy stocks today and then selling the ' five years later, the same not once! But: good buy stocks at cheap prices. So what if the stock continued to rise later to valuasinya so not cheap anymore? Or if fundamentalnya not good anymore? Yes, that's when you could consider selling it, and later moved into other stocks duitnya which is also nice, but valuasinya is still cheap. Gitu!
Okay, then what is causing the WB changed his strategy, of who used to hold for a few months up to 2 – 3 years, ' hold forever '? The author himself takes quite a while to answer this, but now I understood the answer: If you hold the Rp10 million, then you can invest in any stocks, including shares not liquid though, and you could easily sell it back After some time.
But if you pegangnya let say Rp10 billion, then certainly not easier & tastier it to conduct the activities of buying and selling stocks, where you can not longer buy stocks that you seek at once in a single transaction, so when you sell it can not at once. In other words, investors with big funds can't ' agile ' motion as other investors that the Fund was smaller. Even the WB itself took a couple of years (from 1987 until 1990) just to accumulate shares of Coca Cola, worth a total US $1 billion.
And on this day, the value of the investment has gone up on KO BRK becomes US $15 billion ($10 billion US supposed, but WB then some times increase its investments in KO). The question is, when to buy shares valued at US $1 KO billion only took a few years, then how long will it take to sell that same stock worth 15 times thatof her???
Because of that, the authors think the WB instead of dont want to sell KO in December 1998, but he early on can not/it's hard to sell it. WB itself through annual letter--his admitted that before the year 1980, he always implement a strategy to buy cheap shares, then sold at high prices. But along with the continued rise in funds-run, WB then realizes that he can not longer apply the strategy of selling – buy it that way. So entering the year 1980 's, especially after met Charlie Munger (thus Munger was the one who first taught the WB to buy stocks and then hold forever), WB then changed his strategy: only buy stocks that really good ( earlier WB sometimes buy shares of the company, provided that the price is coro class really terdiskon) at a price that is lower than its intrinsic value, then hold forever.
And armed with the strategies ' holding forever ', BRK later success to continue growing until now, but still, if the investment return than WB in 1960 's, then the performance of BRK in one or two decades is less satisfying (read longer paragraphs above, a matter of no optimal investment performance with a strategy hold forever). And WB himself acknowledged that the period of 1960-an thus is his best period as a value investor, where he was when it had averaged a 29% return per year, has included years of crisis. While on this day, the average return BRK from the year 1965 – 2016 only 19% per year (but this at once break the criticism that says ' Warren Buffett did not return it because as good as its investments not even semalem nyampe 20% per year. Well, please point to any investor that you think is very good, and then he got hold of funds held by the WB this time: approx can not he's also 19% return per year?).
Conclusion
Most beginner investors, when he first googling the name ' Warren Buffett ', then he's learned is how to invest the WB at the moment, namely when he has become one of the richest men in the world. However, experienced investors understand that the way investment WB, though the rules remain consistent based on value investing, but are constantly changing and evolving as time goes by, because it adapts with the magnitude of the funds-run, etc. So unless your name was also sticking in Forbes magazine, then you can't invest with exactly the same way by means of investment, but now WB you can try reading it again, like what how to invest funds at first when WB is still somewhat small (even though it may also be worth noting that the WB since the first quick trading never/swing trading. Time hold the shortest he was a couple of months).
And indeed that's what writers do: study the WB investment strategy in the past, where after adjusted again with the condition of the stock market in Indonesia etc, the result is ' stock investment strategy Firm Hidayat ala ', as many presented on this blog. But although there are many differences, the important principles of value investing remains his dipake: buy good stocks at a cheap price, that's it. And the result, as you can read – read more in stock analysis archives on this blog, is quite good.
