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A Longer Horizon

newsletter_2015_11

2015 has been a tough year for stocks, especially so for top money managers. Through three qtrs the S&P 500 (the market) was down 7%. Star money managers faired much worse. Hedge fund managers David Einhorn & Bill Ackman were down 17% and 13% ytd, respectively. My Growth Portfolio was down 15%.

One star manager faired much better. Ron Barron’s Growth Fund only lost 6% through Sept 30th. His investment style is to buy-and-hold the stocks he likes, and allow the companies to double in size every 4-5 years. He owns 100 stocks, doesn’t pay attention to the stock market, but instead holds for the long-term. His average turnover is 11%, which in my portfolio would be three buys/sells per year.

When I look at the three managers (all Billionaires btw), Barron is the one I admire the most, and need to emulate.
When I look back at my performance, two things stand out most. One is not buying some of the great stocks of our time because the P/E was too high. Two, selling a stock to either buy another or because I felt it was overvalued. But when I listen to Barron speak, he never says he sold because the valuation was high.

I’m adjusting my investment strategy. I will become more of a buy-and-hold investor, buy leading stocks even if I feel the P/E is high, and grow the Growth Portfolio from 30 to 50 stocks. More stocks will provide you with smoother returns, and hopefully better ones as well.

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