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The Equitymaster Research Digest

Perceived Bankruptcy, a Laundry List and more...
Oct 1, 2015

Allow me to depart from the norm and start with the mailbag this time. It is not unusual for us to find similar queries from subscribers across products. But very rarely do we have so many of you writing to us about a common dilemma - how long to hold on to the stock.

There are stocks that have swung to 52-week highs and lows within past few weeks. Others have been paralyzed for months. This dichotomy has naturally shaken your confidence and left you seeking hope and reassurance. The good news is - you are not alone.

Your role as an investor is not to constantly act. As Buffett proudly proclaims, you could do very well with lethargy bordering on sloth. However, that should not stop you from introspecting on your actions and digging deep into your mistakes. Buffett and Munger do that all the time! And their brilliant letters to shareholders of Berkshire are a product of it.

Coming back to the common dilemma of our subscribers. Knowing how long to hold a stock must be a result of the assumption that you made when you bought it.

If you assumed that an undervalued stock would fetch premium valuations, you should hold it only as long as the valuation metrics are met.

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