1/6 Thread: The art of selling your stocks
Since 1926, top 4% companies explain the net gain of the entire stock market in the US.
Yes, 4%!
The rest 96% in aggregate matched the US treasury bill returns.
Few investors understand this better than Chuck Akre. Here's why.
Since 1926, top 4% companies explain the net gain of the entire stock market in the US.
Yes, 4%!
The rest 96% in aggregate matched the US treasury bill returns.
Few investors understand this better than Chuck Akre. Here's why.
2/6 Akre beat S&P 500 index by 140% in last 10 years without owning any of the FAANG stocks!
The firm has this "weird" philosophy:
"We are unfazed when our businesses are quoted in the market at prices above what we would pay for them."
Why?
The firm has this "weird" philosophy:
"We are unfazed when our businesses are quoted in the market at prices above what we would pay for them."
Why?
3/6 Three reasons.
I. There may never be an opportunity to buy it back.
II. Great businesses are just too hard to replace.
III. "The very best businesses tend to exceed expectations. What may seem like a high price today may be proven to be perfectly reasonable in hindsight."
I. There may never be an opportunity to buy it back.
II. Great businesses are just too hard to replace.
III. "The very best businesses tend to exceed expectations. What may seem like a high price today may be proven to be perfectly reasonable in hindsight."
4/6 Compound returns are exponential in nature.
If you buy a stock, and the stock doubles, think this before selling:
"Having doubled your money once already, the next time the stock price doubles your investment will be 4x your cost. The next time after that, 8x. Then 16x."
If you buy a stock, and the stock doubles, think this before selling:
"Having doubled your money once already, the next time the stock price doubles your investment will be 4x your cost. The next time after that, 8x. Then 16x."
5/6 So you don't sell at all?
You do. When a business
"1. is no longer growing at an above-average rate,
2. has had its competitive advantage impaired, or
3. has had an adverse change in management."
You do. When a business
"1. is no longer growing at an above-average rate,
2. has had its competitive advantage impaired, or
3. has had an adverse change in management."
6/6 Relevant links
Akre blog: akrecapital.com/the-art-of-not…
Academic paper: papers.ssrn.com/sol3/papers.cf…
Akre blog: akrecapital.com/the-art-of-not…
Academic paper: papers.ssrn.com/sol3/papers.cf…
