Should You (Ever) Sell A Great Company?

No – But Be Prepared To Weather The Storm

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Table of Contents

• No – But Be Prepared To Weather The Storm

• Three Things You Need to Know Before We Go…

• And one more thing…

Knowing what shares to add to your portfolio to build wealth is difficult… but in some ways, knowing when – and whether – to sell is an even bigger challenge.

Porter & Co. Partner Pass member Fred A. recently asked a question that we’ve been hearing a lot lately… and it gets to the crux of one of the most difficult parts of investing: When – if ever – should you sell shares of a great company?

The answer – as with so much in investing – is deceptively simple. 

Here’s Fred’s query, and my reply…

Porter, thank you for your invaluable insights and analysis over the past two decades. You’ve helped many ordinary folks like myself achieve a level of success in investing we would not have achieved otherwise. You have literally changed our lives.

However, in two recent issues of your Daily Journal, where you say stocks will not increase in value for the next decade, and when you explain that Warren Buffett almost retired from investing, leave me concerned and confused. You have taught us how to identify and value the best, capital efficient companies and to purchase their stocks at reasonable prices. We also have Porter Stansberry’s Permanent Portfolio. 

You have clearly advised that these types of stocks, purchased at reasonable valuations, are not to be sold or traded in and out of – unless some serious, material change to the operation, management, profitability, or future market for its product or service has occurred.

I agree that stocks of these wonderful companies purchased at today’s rich valuations will not produce excellent returns over the next decade. So, as you state, “Unless you know for certain that you can hold your investments, without fail, for the next decade at least, it’s time to sell...”

But can you please clarify further? What about your loyal subscribers who purchased these wonderful capital efficient companies like McDonald’s, Coca-Cola, Hershey, Domino’s, Apple, NVR, Google, Starbucks, Berkshire Hathaway, and American Express, and they were purchased five to 10 years ago at reasonable valuations?

These folks will have a far lower cost basis on these companies than an individual who purchases them today. They will have many years of compounding and growth that have allowed these stocks to gain 75% or 150% or 250% over the years.

What if they are a retiree and don’t know if they have another 10 to 15 years to live, and need the income from their portfolio? Do you still recommend selling these wonderful companies and going to cash now?

Please clarify your stance on selling your holdings unless you know for certain you can hold your investments for the next decade? Are there exceptions for investments purchased a decade ago at far lower valuations? Are there exceptions for folks aged 75+ who don’t know for certain they have another 10 years?

Again, thank you for all you provide on our behalf. I don’t say this lightly... you are my hero.

Fred –