Buffett Beyond Value: Why Warren Buffett Looks to Growth and Management When Investing

Chapter 17. When to Sell

If you aren't willing to own a stock for ten years, don't even think about owning it for ten minutes.^[147]

—Warren Buffett

A typical mutual fund portfolio holds a stock for one to two years; a turnover of 100 percent is not uncommon. Not Berkshire Hathaway's portfolio, though. By examining Berkshire's turnover of stocks and the stocks sold, we can learn what Buffett would recommend about the length of time you should hold a stock in your portfolio and when you should sell.

Turnover of Berkshire's Equity Portfolio: Why Buffett Holds Almost Forever

I started analyzing Berkshire's buying and selling of stocks in about 1994. At the end of 1994, Berkshire's investment portfolio of $70 billion consisted of $15.2 billion in common stocks. During 1995, Berkshire sold $1.35 billion in common stocks from its portfolio. In other words, it turned over about 9 percent of its portfolio. Purchases were $1.46 billion, slightly in excess of sales. Berkshire's common stock portfolio grew to $39.8 billion in 1999, and the turnover from 1994 to 1999 averaged about 10 percent per year. In recent years, Berkshire's turnover has declined to about 5 percent, implying an average holding period of about 20 years.

This analysis does not fully capture Buffett's strong belief in long-term investing. Since some of Berkshire's investments are for short-term arbitrage, this computation is conservative in reporting the average holding period. Nevertheless, 10 to 20 years is still a very long ...