I think investing is very fun, but my actual strategy is very boring. At least, it could easily be perceived as boring. Every stock I buy, for the most part, is one that I plan to hold for many years. I really don’t ever plan to sell stocks, but I will if they start trading much higher than I think they should be. The goal, however, is to never sell.
Many people claim that this is not a good strategy because without selling, the gains from a company’s increase in value is never realized. While true, I look for companies that are going to pay me cash flow. I treat investing in stocks like one would invest in farmland. If one buys a farm, they probably aren’t checking quotes for that land every day. They are running a farm to get cash flow on that land. Maybe eventually they will sell the land, but they are owning it for the cash flow. I buy businesses for cash flow. I then use that cash flow to buy more companies so that I can get even more cash flow from them.
When I look at a stock, I am not looking for something that I can flip for a higher value in a few months. I am looking for a company that I can own for decades that will steadily increase the amount of cash flow that it is paying me. Obviously, I want the company to increase in value as well over those decades, but it is not something I have any plans at all to sell.
This is my personal strategy. If I find a company trading at a good valuation that is steadily increasing their earnings per share year-over-year, I will buy that stock. I’m not saying it is the best strategy, but it is my strategy.
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Finance by CWT 