In their latest Q2 2020 market commentary Lindsell Train, the company co-founded by Nick Train and Michael Lindsell, provided some great insights into the age old dilemma that faces investors – how long to hang on to winning stocks. Here’s an excerpt from the commentary:
To summarise then, here’s a quote (very much worth transcribing in full) from Benjamin Graham’s 1973 edition of the Intelligent Investor. He recognised the value that great companies can deliver when they’re loved enough and the difficulty that all but the most stubborn (or emotionally attached) of investors have in resisting the temptation to take profits.
“The big fortunes from single company investments are almost always realized by persons who have a close relationship with the particular company – through employment, family connection, etc. – which justifies them in placing a large part of their resources in one medium and holding on to this commitment through all vicissitudes, despite numerous temptations to sell out at apparently high prices along the way. An investor without such close personal contact will constantly be faced with the question of whether too large a portion of his funds are in this one medium. Each decline – however temporary it proves in the sequel – will accentuate his problem; and internal and external pressures are likely to force him to take what seems to be a goodly profit, but one far less than the ultimate bonanza.”
In many ways we try to follow this advice – the only difference being that as active investors we are at greater liberty to choose our long-term partners. But it’s all the more important then, to commit to your great holdings once engaged. Choose only the best as custodians of your hard earned funds, and then hang on to them for as long as you possibly can.
You can read the entire commentary below, or at the original source here:
https://www.lindselltrain.com/~/media/Files/L/Lindsell-Train-V2/reports/ltglobal-equity-fund/2020/LTGEF_MR_2020_09.pdf
(Source: Lindsell Train)
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