travelightor asks - How long will you be willing to wait? He's...

travelightor asks - How long will you be willing to wait?

He's asking the wrong question.

When we invest, we almost always have a collection of hopefully great purchases such as UOS, at a (hopefully) great price.

Unless we wish to put most or all of our life savings into the one stock, then the question "How long am I willing to wait?" on that individual stock should never enter the equation.

We can be totally right on the fundamentals, yet the timing of a given stock's 'pay-day', in most cases, is indeterminate.

A portfolio of value stocks is like an orchard. Even with the best intentions at the time of planting, some trees will die, others will never bear, some take forever to eventually bear, some yield early, some yield poorly, some yield like champions etc. etc.

But with the right management, an orchardist can make a very decent living. If, over time, he selects the right varieties, spreads his risk by planting different varieties, cuts out diseased trees etc. he will find that on average it takes, say, 4 years* for a tree to bear fruit. It doesn't really matter that some yield early, late or never. The average will still be 4 years*.

The only thing that should concern us then as value investors is our average annual compound after-tax rate of return on the whole portfolio. If we do our homework correctly on each stock, everything will work out well for the portfolio.

*<
So on average I'm getting a thrill on one twentieth of my total capital invested every 10 weeks, even though the wait for the typical stock - UOS if you like - has empirically been calculated as 4 years.>>