A good investment can be a lot like a good relationship: The wise among us pick their partners carefully, and they're looking ahead to the long haul. And asMotley Fool fans well know, one key to Foolish investing is the buy and hold philosophy -- no high-frequency day trading going on here!
On this episode ofMotley Fool Answers, Alison Southwick and Robert Brokamp are joined by Jason Moser, who breaks down what he looks for in a "never-sell" stock. First attribute on the agenda: the company's culture.
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A full transcript follows the video.
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This video was recorded on August 2, 2016.
Alison Southwick: Dearly beloved, we are gathered here, together, today, to join this investor and this stock forever in investing matrimony.
Robert Brokamp: Da, da ... da, da, da, da, da Is that the wedding theme?
Southwick: There's a lot of different wedding themes.
Brokamp: That is a wedding theme.
Southwick: You could have gone Pachelbel's Canon. The point is that here at The Motley Fool we are long-term investors, and so the idea of investing in a stock for three, five, or 10 years ... that ain't no thing ... but investing in a stock forever! A stock that you'll have and hold forever!
Jason Moser: It sounds like such a long time.
Southwick: It does sound like such a long time. So Moser Moser joins us here, today. He is an analyst with Motley Fool's Million Dollar Portfolio service.
Southwick: He also is a frequent guest on MarketFoolery. In fact, anyone who's out there who listens to the Howard Stern Show would have heard Moser Moser on there.
Moser: That was a nice nugget from the week. We owe that to one of our MarketFoolery listeners who actually pinged them over at the Stern show from something on Monday. Just kind of funny how that all worked out.
Southwick: Yeah, that is funny. So kind of a big deal that Jason Moser joins us today. He goes from Howard Stern to our show!
Moser: How about that?
Southwick: Thanks! Thanks for joining us. So never sell stocks. Let's talk about that first, because in general I feel like we invest in stocks so that someday we can cash them out for a ton of moola. So why would we have stocks that we want to hold essentially forever? Are we really talking about forever?
Moser: I'm glad that you asked that because I've had many people ask me that very question. It's one thing to consider yourself a buy-to-hold investor. We want to look at the long run versus the short run. That's our edge as investors. But yes, you're right. At some point you want to actually realize the fruits of your labor and cash in those gains.
It all basically depends on why you're investing in the first place. Many of us are investing in order to insure our financial independence in our later years. Perhaps some people are investing because they want to leave their kids something after they pass on, and that's fine, too. It's all a matter of understanding, ultimately, what your goals are. Then once you can identify your goals, then you can identify if you really need to plan on holding this stock forever, or if forever really is like a 10 to 20 year time horizon because, honestly, that can make a big difference.
Southwick: And honestly, how many people get married and they're like, "I'm going to love you forever," and then they get divorced. So, whatever. There's wiggle room.
Moser: But I think it's also worth noting that we three, here, are all married (not to each other, of course) but I think we're all still on our firsts...
Brokamp: You'd be so lucky, Jason.
Moser: ...for quite some time, and it seems to be working out for some people in this world.
Southwick: We're all on our firsts. Yes, that's true.
Moser: I do think that's an important thing to note, and so when we say "never sell stocks" I think that's a little bit of hyperbole in that we really do focus on longer-term investing than most do.
Southwick: So maybe we're talking more about a time horizon of 10 to 20 years.
Moser: Sure. I think 10 to 20 years is a pretty neat way to look at things. I'm 43 years old today. There are companies in my personal portfolio that I would love to still own when I'm 63.
Southwick: Well, let's get into it. We've got a few different categories that we're going to look at when it comes to determining whether that stock is a "never-sell stock," and the first aspect we're going to look at is company culture.
Moser: Sure, culture.
Moser: Culture's a big deal. We talk a lot about culture here at The Motley Fool because we're very proud of our culture, and speaking as someone who's worked at a number of companies, before, where the culture maybe wasn't as strong (or definitely wasn't as strong), culture can make a big difference.
It doesn't make or break an investment, but whenever we find a company that has a strong culture, that is a quality that we want to dig further into. Learn more about the company -- what it does, and why it may be a good investment -- understanding that when the business wins, it's not just the business at hand. It's all stakeholders involved (customers, employees, the world).
There are a lot of different companies out there that probably fit in this realm. You look at Under Armour(NYSE: UA), for example, from a perspective of an ownership structure that's vested and aligned with the interests of shareholders. Kevin Plank, the founder and CEO of the company, owns the majority voting rights of that company, and they recently undertook a stock split to insure that he would keep that power for many years to come.
Now I know some people are a little bit critical of moves like that. We've seen other companies like Google, for example, who have done the same thing, or I guess Alphabet is what it's called today. The flip side of that coin is he's got a pretty good track record. The company's now 20 years old and it is doing quite well. Investors in Under Armour have won all along the way.
Southwick: So when we're looking at company culture, we're looking at happy, engaged employees. We're also looking at upper-level ownership stakes in the company, it sounds like.
Moser: And very driven leadership. Kevin Plank is known for having mottos all over their headquarters. Humble and hungry. They continually want to get better, but also not get too big of a head in the process. I think that Under Armour, generally speaking, has a pretty strong culture that we've noted for years at the Fool, and it's worked out to be a wonderful investment, thus far.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fools board of directors. The Motley Fool owns shares of and recommends Alphabet (C shares) andUnder Armour (A Shares). The Motley Fool owns shares of Under Armour (C Shares).Alison Southwickand Robert Brokamp, CFPhave no position in any stocks mentioned. Jason Moser owns shares of Under Armour (A Shares) and Under Armour (C Shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.