Sather Financial

Contact Us

Sather Financial Group

120 E Constitution St
Victoria, TX 77901

(361) 570-1800


PDF Print E-mail

What Is Your Holding Period?

The business headlines from around the world have been tough, if not brutal.

The Greek financial system continues to burn with little progress towards a workable solution.

After trading for more than 40 times next year’s earnings, the Chinese market has been in free-fall—dropping more than 30%. Their economy is sputtering as the ramifications of too much debt unravel. Once again, we are reminded that debt can greatly magnify the impact of decisions. As a result, more than 1,400 Chinese companies that had been publicly traded no longer do so. Ironically, one ton of cabbage in China is now more valuable than one ton of steel.

At the same time, negotiations with Iran over their nuclear program continues to struggle. As these issues unfolded, the price of oil fell to $52 per barrel—down 45% over the past year.

Oh, and a supposed “technical glitch” pulled the plug on the New York Stock Exchange for more than four hours.

Given this back-drop, many investors are second guessing their investment strategies. The world is a scary place.

If you are trying to make fast decisions in the financial markets, good luck. Rarely is there wisdom, or success, associated with being quick. Rather, a thoroughly researched investment offers much better opportunity for long-term success.

Recognizing this, I am reminded of one of my favorite Warren Buffett quotes: “If you aren't thinking about owning a stock for ten years, don't even think about owning it for ten minutes.” Buffett has reinforced this by saying you shouldn’t own a company unless you would be perfectly content to own it while shipwrecked on a desert island.

Buffett has repeatedly shown he is not only very logical in his assessment of business opportunities, but very long-term in his focus and thinking. This behavior should also serve you as a filter in terms of the total number of companies you would ever consider owning.

If this has worked for Buffett, there is certainly merit in modeling your investment thought process in a similar manner.

So often in the very fast paced, electronically enhanced world we live in, we think we must be doing something all of the time. The brokers of the world encourage us to buy and sell nonstop. The sales pitch is designed to motivate action, but not necessarily to enhance your wealth or investing success.

Buffett has also encouraged investors to understand what a stock represents—ownership in a business. As such, whether you own one share or the whole company, you should behave as if you own the whole company.

I thought about this mindset as I read the story of Lewis and Birgit Neitsch, who after 40 plus years of running Moo-Moo’s drive-in restaurant, are transitioning ownership. Forty years is a long time—even in Buffett’s world. However, Neitsch has proven to be a serious long-term investor.

When Lewis Neitsch took over the Moo-Moo operation from his father he was not thinking, “If someone offers me $100 more than I paid for the business, I’m going to sell!” However, when people rapidly trade stocks that is exactly what they are doing.

Obviously, it would have been silly for Neitsch to sell for such short-term profit. The value was far more than a piece of paper that traded under the ticker symbol “MOO.” Instead, he dutifully showed up to work taking good care of employees and patrons along the way. In the process, he recognized there was far more value to be derived by focusing on the long-term.

Furthermore, when investors allow themselves to make long-term decisions they lower commissions and improve tax efficiency. Having this focus also removes kneejerk reactions from fear and emotion.

Going forward, accept that there will always be an issue with Iran, China, Greece, Russia or some other nation. Something will always unnerve you. However, you cannot allow that to distract you. Instead, remain focused on your long-term goals recognizing that when you buy stock you are buying a business. Improve your odds of success by investing in businesses you are perfectly happy owning for a minimum of ten years. Not only will your opportunity for success increase, but you’ll sleep better at night too.

Originally published July 13 2015, Victoria Advocate