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Don’t invest for ten minutes if you’re not prepared to invest for ten years



WHEN WE LOOK at the share price of a company we usually see a wildly fluctuating graph with mighty hills and plunging chasms.
For example, on the right is the graph of the daily closing prices of a company over ten years. It would be a brave person who could look at this graph and say what was going to happen in the next 24 hours, let alone the next 5 to 10 years. Yet this is a typical graph of the prices of a listed company.But what about this graph? Because it is growing so consistently we would have a lot more confidence in making forecasts of what was going to take place in the future.
This graph is of the earnings per share of a company. If you were buying a company, this is just what you would want — a company whose earnings and sales go up like clockwork by 15 or 20 percent or more each year. It is no different when you invest in companies via the stock market.
In fact, the above two graphs of the same company, ARB Corporation. This is an Australian company that manufactures and supplies equipment for off-road and four-wheel drive vehicles around the world. The first chart depicts the closing prices while the second chart displays the earnings per share over the same period.


When we put the two charts together, we see how they track each other. Sometimes the price moves ahead of the earnings per share and sometimes it is the other way around. But over time they move together
Clearly it is an advantage to be able to find companies with such steady and strong growth in earnings.

When we locate such companies, we are well on the way to finding quality investments.
In the case of ARB, a simple buy and hold investment of $10,000 in ARB Corporation in 1994 would now be worth over $200,000 ten years later. This brings us to what Warren Buffett said a few years back, “If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes.”
He continued, “Put together a portfolio of companies whose aggregate earnings march upwards over the years, and so will the portfolio’s market value.”
In other words, as investors we focus on the medium to long term business characteristics of companies. It is these that drive the share price.
Focusing on the short-term aspects of a company including both business and price fluctuations is foolish as Buffett has said. “Most of our large stock positions are going to be held for many years, and the scorecard on our investment decisions will be provided by business results over that period, not by prices on any given day.”


Even though we focus on the long-term, the investment is even more profitable if we purchase the stock during one of its drops. Buffett has said that even for the best of companies, you can still pay too much.
Implementation using Conscious Investor
There are two key features of the growth in sales and earnings: the rate of growth and the stability of the growth. Conscious Investor provides proprietary tools to measure both of these for thousands of companies. In a matter of seconds you can hone in on companies with the desirable features of high and stable growth. When you put together a portfolio of such companies, then your growth in wealth follows automatically.
But there is more. A second feature of Conscious Investor is a proprietary tool to help locate those special buying opportunities when there is a temporary drop in the price even while sales and earnings are moving ahead.
Another high-performance outcome from using these tools in Conscious Investor is that you can make forecasts of earnings with five times the accuracy of analysts. In my free mini report Earnings Forecasts Made Easy, you’ll learn how easy it is for you to be your own best analyst. You can see the report at: www.buffettsecretsrevealed.com/articles/forecasts.pdf
Even though Buffett’s aim is to hold shares for the rest of his life, when the profit is there, and the share price has outpaced the value of the underlying business, then he sometimes takes it.
The exciting thing about value long-term investing is that, time and time again, you outperform the market in the short term as well as in the long-term. If you own shares in a portfolio of great companies with sales and earnings moving upwards that you bought at sensible prices, then it often doesn’t take long to show up in the share price. It is such a thrill to see the market pick up stocks that you have bought. Not because of some charting arcana ― but because, to put it simply, you have used the tools in Conscious Investor to find great companies selling at profitable prices.