I read this blog post today and found it had a lot of relevancy for us CRH holders that have continued to hold based on our DD and filtered out the noise and bashers.
The hardest part of achieving 10-20+ baggers is having the patience and conviction to hold through multi-year periods of underperformance. Patience is your biggest asset when investing in a great business. Time always pushes out the weakly convicted and creates opportunities for those with a long-term perspective. The greatest flaw in the short-term investor is they think great business performance is always linear. The truth is that even great businesses suffer growing pains, and so do their stocks.
The investor that always worries about “next quarter” will sell at any sign of imperfection. Since no company is perfect, this means they will always sell too soon. Short-term investors will accept a 20% gain because they didn’t spend the time to develop the conviction and foresight to see the next 500%.
The second hardest part of achieving 10-20+ baggers is holding stocks that sometimes look expensive by traditional metrics. If your aim to is hold a great business for a long time, you are going to have to get used to holding a business that isn’t always “cheap”. This is a topic that David Gardner talks about in this Invest Like the Best podcast.
Whether it’s holding a great business whose stock doesn’t move for months or years, or holding one that doesn’t look “statistically cheap”, there is an art to holding. The simple answer is you focus on the business, not the stock.
A successful long-term investor today needs to be incredibly focused on knowing what they own better than others. This means they cannot depend on others for their due diligence. You need to do the work. You can borrow someone else’s stock ideas but you can’t borrow their conviction. A multi-baggers journey is filled with the corpses of highly intelligent-articulate naysayers. There isn’t one great stock or company that wasn’t credibly doubted all the way up (H/T @EdBorgato). Put on your armor of diligence and conviction so you can hold a great company when you find one.