Re: Buy-and-Hold Investing May be Dangerous to Your Portfolio
I think this article mischaracterizes Buffet's methodology. I'd say it's more accurate to characterize Buffet as a value investor. Because Mr. Buffet performs due diligence on the companies he acquires, is apparently very good at estimating their value based on discounted cash flow, etc., and performs his analysis based upon long-term trends, his investments tend to be long-term holds--and he expects them to be long-term holds. However, since Mr. Buffet pays close attention to fundamentals, valuation, etc. for his holdings, he would be very unlikely to stubbornly cling to an investment that has become overvalued, or whose long-term prospects have appreciably changed.
If "long-term buy and hold" == "buy a great company and forget about it," I think the article's assessment of that style of investing is correct; however, by implicitly defining it that way I think the author created a straw man. Most investors who would call their style "long term buy and hold" would strongly protest that "long term buy and hold" != "buy a great company and forget about it"; rather, they would say that successful long-term buy and hold investing requires diligent tracking of your investments WRT fundamentals, valuation, and trends.
I think the Gorilla Gaming methodology that has evolved from Moore's books and from the discourse on the SI and Fool threads can be characteristized simplistically as: A method of technology investing which is based on "Buffetology", but applied with added insights about characteristics (related to adoption life cycle, barriers to entry, competitive advantage, etc.) that are unique to technology markets. |
