Long-term holding to get rich
It’s impossible to get rich without long-term investing. Long-term investment and long-term stock holding are the most important prerequisites for stock market investors, and nothing else is more important than this.
Long-term holding is extremely important
Many friends have read my book “The Rules of Super Growth Stocks Investing“, “The Rules of 10 Baggers“, and this blog, and they all feel the same way about long-term investing. However, I also have to admit that the next question many people ask is that the world is changing too fast, and it is getting faster and faster, and the possibility of long-term stock holdings is getting lower and lower. What we’re going to discuss in this article is the possibility of long-term holdings, and the long-term holdings of companies that are suitable for investors.
My standard is twenty years or more.
Long-term holding discussion in my books
Especially long-term holdings are extremely important, so in my last two books, I have spent a lot of time discussing the extremely important topic of long-term investment; including:
In my book “The Rules of Super Growth Stocks Investing“:
- Section 1-1, pages 20-21, several key points about super growth stocks
- Section 1-1, pages 23-26, about the success stories of several famous ordinary people in long-term investment
- Sections 1-3, pages 36-44, on the compounding effect of long-term investments
- Sections 1-4, pp. 45-58, on why not investing for the long term can fail and 4 advantages of holding stocks for the long term
In my book “The Rules of 10 Baggers“:
- Section 4-1, pp. 184-192, on the 10x stock investing strategy
- Section 4-2, pp. 193-202, on long-term holdings and patience
Which company is more suitable?
ETFs tracking broader market
You would never have guessed that I would list ETFs tracking broader market first! Strictly speaking, “S&P 500 index, the only stock worth holding forever“
Monopoly
There are many types of monopoly, including substantial monopoly or oligopoly. Several companies collectively manipulate the market through different methods to control market share. But the prerequisite is that the company must have a moat, that is, an economic competitive advantage, otherwise all this is difficult to achieve.
Friends who are interested in in-depth understanding of the discussion on moats and corporate economic competitiveness can refer to the special chapter in Chapter 2 of my book “The Rules of Super Growth Stocks Investing”.
Companies without competitors
Many people may question that there is no such enterprise in the world! Please refer to the several listed companies listed in the article “There are indeed monopoly in this world” that I wrote. They are unlikely to have rivals in the past, present, and even in the future.
Companies consistently delivers good performance
Note that we are emphasizing the word “continuous” here. This kind of enterprise may face many challenges, as well as large and small competitors, but it can still resolve them one by one and deliver good results. After all, companies with monopoly and no competitors are a minority, so “most of the stocks of companies that are suitable for investors to hold for a long time belong to this category.”
What about technology companies?
Characteristics of tech companies
Honestly, tech companies are far less likely to meet these criteria. There are gains and losses; tech companies share the following common characteristics:
- P/E ratios and all market valuations are high in good times.
- The business is growing much faster than other businesses.
- Market share is obtained, and business expansion is also easy; especially in the Internet age, this advantage is highlighted.
- Stock prices fluctuate wildly.
But it comes and goes quickly; few tech companies are suitable for investors to own “for the long term.” A company like Texas Instruments is extremely rare. For detailed reasons, please refer to my previous post “Great companies are rare, two or three will make you very rich” and “How does Texas Instruments make money? Amazing long term capital reward and company net profit margin!“.
Take four companies as an example
Let’s take the most famous IBM (ticker: IBM), Wang Laboratories, Computer Associates, Oracle (ticker: ORCL) as examples. These four companies are the hegemons of the technoloy when they are on the glory day, and they are no less than today’s Apple (ticker: AAPL) and Microsoft (ticker: MSFT), and even more. But now what? All this has changed in the last twenty years, yes! It’s only been twenty years, and it’s beyond recognition.
IBM
In the past two decades, IBM, a century-old enterprise, has had almost lackluster operations and stagnant growth. Of all the sub-sectors of the tech industry, IBM is no longer the leader in any sub-sectors of the tech industry. For IBM in detail, please refer to my post “How does IBM make money? What’s next?“
Wang Laboratories
Before the advent of personal computers, Wang Laboratories, founded by Chinese Wang An, was a technological device that all companies had to purchase for word processing at that time. However, the emergence of personal computers has made the price of computers more commonplace, and Wang Laboratories’s core business, word processing, is no longer an expensive and out-of-reach software. Personal computers are not only equipped with more advanced graphics display methods, but also have many software options that are more advanced than Wang Laboratories’s word processing equipment.
Computer Associates
Computer Associates, a company founded by Chinese, was the second largest company by market value in the computer industry twenty or thirty years ago. But in the past fifteen years, it has hardly had visibility, and finally the group was acquired by Broadcom. Please refer to the description in my previous post “Significant changes in Broadcom’s business approach“.
Oracle
Although the software company with the second largest market capitalization 20 years ago is still active in the software market, the consensus of most people in the industry is that its beauty is in the past tense; because it missed the cloud computing revolution, and the core database has been hit again. To the competition of countless rising stars, coupled with many free open systems eroded its market.
Five Buffett holdings
Buffett has a lesson for all investors when it comes to the possibility of long-term holdings.
Coca-Cola
The longest-held stock in Berkshire’s portfolio is beverage stock Coca-Cola (ticker: KO). Coca-Cola has been Buffett’s core asset since 1988. Hold for 34 consecutive years. Regarding Coca-Cola, you can refer to my two previous articles “Coca-Cola has been inferior to Pepsi in and even return rate is negative in past 10 years!” and “Pros and cons of investing in Coca-Cola“
American Express
29 years, the second-longest-held Buffett stock is credit services provider American Express (ticker: AXP). American Express has been a fixture in Berkshire’s portfolio since 1993.
Moody’s
22 years, Buffett’s third long-term holding is the credit rating agency Moody’s (ticker: MCO). Berkshire has been a shareholder since 2000, when Moody’s was spun off from Dun & Bradstreet.
Globe Life
Hold for 21 years. Aside from bank stocks, insurance companies are probably one of Buffett’s favorite places to put his company money. Globe Life (ticker: GL ), an insurer known as Torchmark until August 2019, has been Berkshire’s continuing holding company since 2001.
Procter & Gamble
Procter & Gamble (ticker: PG ) stock in the early 2000s is now a rarity in Berkshire’s portfolio weightings because Buffett sold some of his holdings in Procter & Gamble. But Procter & Gamble joined in the first quarter of 2005, meaning Berkshire has owned it for 18 years.
Conclusion
Investing is easier said than done, and I’ll end this post with a quote from Buffett: “Investing is easy, but it’s not easy.” In his 1996 shareholders letter, he wrote “If you’re not willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.”
Related articles
- “S&P 500 index, the only stock worth holding forever“
- “Stocks are the best bet for long-term investors“
- “How Buffett Structures His Long-Term Investment Portfolio“
- “What helps Buffett to get his investment idea?“
- “Possibility of long-term holdings, Deep dive on Buffett’s case“
- “Is Buffett no longer hold for long haul? TSMC, HP, and US Bancorp cases study“
- “Why long-term investment is better?“
- “Investors should pay attention to the annualized rate of return (IRR), How to calculate?“
- “There are indeed monopoly in this world“
- “Significant changes in Broadcom’s business approach“
- “Take Texas Instruments as an example, great companies are rare, two or three will make you very rich“
- “Coca-Cola has been inferior to Pepsi in and even return rate is negative in past 10 years!“
- “Pros and cons of investing in Coca-Cola“
- “American Express, one of the best investments of Buffett’s career“
- “Stocks Better than the S&P 500, Procter & Gamble (P&G)
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