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Revisiting Two Of Our Biggest Mistakes
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Great businesses are hard to find… These businesses last through major ups and downs… A capital efficient homebuilder… One of our biggest mistakes… We got spooked… Buffett makes a big buy… |
Table of Contents
Editor’s note: Today, we are presenting part of an issue of The Big Secret On Wall Street that reinforces one of the central points that Porter likes to share with readers… It involves not just owning great businesses, but never selling them as well…
We will not be publishing the Saturday Stock Screen and Sunday Investment Chronicles for the remainder of August. Both will resume on September 6 and 7.
Many investors believe the biggest mistake you can make is buying a stock that performs poorly.
But those mistakes – while important (and money-losing!) – are not as bad a use of capital as the mistakes we’ve made by selling great businesses (or not buying them to begin with) because we got spooked following a lousy quarter or we were worried about macroeconomic factors like interest rates.
Few investors remember that many great businesses – including AT&T (T), ExxonMobil (then called Standard Oil) (XOM), and The Hershey Company (HSY) – continued to pay their dividends during the Great Depression, the worst economic crisis in American history.
Most investors probably don’t remember that many of the then-top technology companies – such as IBM (IBM), Intel (INTC), and Texas Instruments (TXN) – maintained their dividends during the dot-com bust.
And many investors may not even remember that many high-quality consumer businesses – like Walmart (WMT), Johnson & Johnson (JNJ), and McDonald’s (MCD) – didn’t cut their dividends during the 2008-2009 Global Financial Crisis.
The point is, no matter what happens in markets or the economy, great businesses tend to do well over the long run. So if you own one of these businesses and can afford to be patient, it’s almost always a mistake to sell.
Here at Porter & Co., we generally try to recommend only great businesses (outside of the occasional more speculative opportunity). As a result, virtually every time we’ve sold – or waited to buy – it has been a mistake.
In this issue we highlight two of the most notable of these mistakes we’ve made, and show you the investment returns we missed out on by being too conservative when buying and holding great companies.