A couple of years ago, I read a book about Warren Buffet in which it was written that Buffet had some permanent holdings. In other words, some stocks that he intented to keep forever or un criss de boutte (like Coke).
I don’t think any intelligent investor can keep a stock under any circumstances. Let’s imagine two completely different situations:
A good management begins to make poor decision and thus becomes a bad management. EPS are declining and the company loses it’s position among it's industry. Can you forgive present errors because of past performance? After a couple of years of bad decisions and a stock that lost 80% of it’s value, could you really keep the faith?
A good management becomes an incredible management. EPS are growing at an incredible pace and the stock is now selling at 60 times forward earnings. Even if the company made you rich, could you be comfortable owning such a high valuated stock?
So, maybe I'm telling you here that a permanent holding should be a well managed business but not too well managed? I don't know if that's really what I think.
Anyway, I own 5 stocks that I consider potential permanent holdings :
I have a deep love for these business and a profound respect for their management. In fact, they're the only stocks with which I have a romantic relationship. Meaning that I dim the light to read their annual report, then I light a candle and open a good bottle of wine. Then, after a couple of glasses and after being seduced by the beautiful balance sheets, I jerk off like an animal. Then, there's cum everywhere: on the pages of the report, on the walls, in my hair, etc.
Year after year, these companies deliver. They have good or great ROE, they have small or medium debt and their beta is low. The more I think about it, the more I’m convinced that a low beta is often an indicator of a good business.
They represent about 38% of my portfolio.
And you, Oh my brothers, what are your potential permanent holdings?