EKS, his 50% rule was for net-nets only, afaik.
One thing about Dr. Graham was that he seemed to me from my reading to be pretty reasonable and practical as regards his rules. I don't believe he had a hard stop sell point at 50% gains. I'd assume he'd use some balance: if the stock still continued to meet his criterion/criteria (e.g. p/e and/or p/bk), I assume he'd still hold. Otoh, maybe (just maybe) because his last methods were kind of like screening and not doing all the in-depth security analysis he formerly did, maybe he'd opine that it would be wise to be taking some profits surely after a double, and finding another candidate as a replacement. (Or selling to conform to his idea of selling stocks when prices are high and shifting to a higher bond percentage.) The net result I guess would be that the portfolio value turnover could be 2-3 years.
I'm not looking at my notes now. I recall reading that somebody, maybe W. Buffett, related this story: That although Dr. Graham did well or well-enough with his methods, he really made his "big" money with Geico. Somehow Dr Graham and Mr. Buffett acquired a large position in the stock when it was a value investment. Dr Graham became publicly associated with the company further as a major stockholder and as a director of the company as well (edit: if I remember the story correctly). The result was that as Geico's fortunes improved and the stock rose and rose and rose, Dr. Graham confided he would have liked to but could not, sell his position. His relationship with the company and/or his involvement with Mr. Buffett kept him from doing so.
So his big win (Geico) was made almost in spite of himself---through a 'self-forced' buy-and-hold, not a buy and sell at 50% gain, or at a double or quadruple or fair value.
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For my net-nets, I use a three year holding period to see if they'll work out. And for other kinds of stocks that don't seem to do anything and where the business doesn't seem to be doing anything either (i.e. value traps), I also try for a three-year hold. I generally would have more $ in each stock in this latter category, so I get antsy after a couple of years, and it's harder for me to hold. What do you guys do? |
