The Little Book of Sideways Markets: How to Make Money in Markets that Go Nowhere

Chapter 12. Applying Darwinism to the Sales Process

Buy and Sell Is the Name of the Game

Selling is usually as popular as candy the day after Halloween. During secular bull markets selling is frowned upon as buy-and-hold turns into investing religion. And since sell violates the "hold" covenant of that religion, the investor who buys and sells is labeled as a nonbeliever, or even worse, a trader (if you say "trader" fast enough it sounds like "traitor").

In bull markets, only wimpy suckers sell as market valuations are expanding and even second-rate dogs (stocks) start looking like pedigreed cocker spaniels. Every investor is now a "long-term" investor, and sell becomes a four-letter word. But being a long-term investor is not about the longevity of your hold decisions, but rather it is an attitude. Holding a stock because you bought it is a fallacy. You should only hold a stock if the future risk-adjusted return warrants it.

Warren Buffett has been mistakenly promoted (though, I'd argue, demoted) to deity status in this buy-and-hold temple. Let's correct this mistake. Warren Buffett became a buy-and-hold investor when his portfolio and positions got big enough, pushing $60 billion, so that selling became a difficult undertaking. Being on the boards of some of his biggest holdings (like Coca-Cola and the Washington Post) has made selling even more difficult. In his early career, before "Oracle of Omaha" was his moniker, he was a buy-and-sell investor.

One doesn't need the benefit of ...