More Empirical Evidence That 'Buy and Hold' Is Not Dead

This is a follow-up to a post from a week or so ago on the "death of buy and hold". As a group value investors tend to have a longer holding period than most, because of that typically the "buy and hold / forget" mantra is applied to them in a blanket fashion.

In the previous post I gave a specific example from myself as to why the death declaration is false.

Let's look at another investor, Bruce Berkowitz of the Fairholme Fund [FAIRX].

Here are the funds returns (click to enlarge):


Here is the funds prospectus:
Prospectus
Berkowitz is the perfect example of what today's "buy and hold" investor needs to be. He buys cheap, waits for value to be realized OR for a fundamental negative change at the company and then sells. He does not simply "buy it and ignore it". While the markets have indeed done and round trip the last decade, Bruce's "buy and hold" has returned 195% over the same time frame....hardly "death like" performance...

If you are a buy and hold type of investor, you MUST buy cheap. There is no other option. Far too many buy and hold folks are under water because they bought expensive. Buy stocks like you buy a TV... on sale.

Comments

[toobad41:]

I agree with your perspective on buy and hold. However, I don't think people who buy stock cheap hold long enough. A couple of stocks that come to mind are Dell and Berkshire Hathaway. Most fund managers or individual's move stocks too quickly because of fear in losing money on paper. I have stock in my portfolio that I've had for over 25 years and still doing well.

Jul 07 09:06 AM

[Old Trader:]

I've lost count of the number of "investors" I've encountered who, when queried about their definition of "long term", respond with an answer like 6 months!!

Jul 07 10:45 AM