TIP633 : What I Learned from Chris Mayer w/ Clay Finck
We Study Billionaires - The Investor’s Podcast Network
Insights on Identifying and Holding onto Exceptional Businesses for Long-Term Growth
Investing in exceptional businesses at fair prices tends to yield substantial long-term returns, often mitigating portfolio losses. A notable example illustrates how a $10,000 investment in a losing stock can be offset by a $90,000 gain from a winning stock. This highlights the importance of focusing on high-quality companies rather than average or subpar ones, which lack significant long-term positive asymmetry. Successful investments, often termed '100 baggers', are more about understanding the characteristics of great businesses rather than seeking quick successes. These great businesses span various industries, including those perceived as challenging, like retail, demonstrated by the success stories of Walmart and Costco. Historical analysis shows that companies typically take an average of 26 years to achieve a 100-fold increase, with most needing between 16 to 45 years, underscoring the necessity of patience in investing. Notable performers like Berkshire Hathaway illustrate that even what may seem like a high stock price can lead to substantial gains over time. Furthermore, the ability to hold onto quality investments longer than average shareholders—who have dramatically reduced their holding periods—can create an informational edge in a market flooded with information. The average holding period for stocks has plummeted from five years in the 1970s to ten months today, indicating a trend towards short-term thinking that contradicts the strategy of nurturing exceptional businesses for prolonged periods.
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