Elevator Rides and Investment Horizons

I had the opportunity to ride in a few fancy elevators in recent weeks.  You know, the ones with television screens.  Both featured business stations, CNBC on the one, and Bloomberg on the other.  CNBC featured charts of various stocks, showing their performance over the course of the day.  Bloomberg, on the other hand, is clearly more oriented towards the long-term investors.   Their charts featured performance of stocks over a, wait for it, two-day performance.

The following is an excerpt from the 1999 report of the Sequoia Fund.  The rest of the letter can be found here.  Sequoia’s reports and annual Q&A meetings are some of the best investment writings out there.

“The tag line in a major advertising campaign by a leading online broker reads ‘In the world of investing, twenty minutes can make you — or break you.’ Another electronic broker markets what it calls “bed-and breakfast” specials: if you buy a stock online from them one day and sell it the next morning, there is no commission charge.  The New York Times reports of a $100,000 investment account opened at a leading electronic broker. In a one year period, this account generated a staggering $1.1 billion in principal value of total purchases and sales of stocks. The return to the investor as a result of all this frantic activity?  The account earned $15,000.”

The Sova Group is currently not in development of a widget that will feature the Fund’s hourly performance on this website.  We will update you if plans change.



More to Explore

Returns for Great vs. Bad Businesses

Munger and The Cattle Rancher

Munger’s ability to find great businesses is directly related to his ability to consistently discard bad businesses. He is excellent at inverting, and discarding the bad businesses as quickly as possible.

The Abominable No-Man and Bad Management

Some investors think a business is good, but know that management is bad.  These investors justify the investment based on the idea that the great price of the business is worth the bad management. This is akin to marrying a supermodel who is going to yell at you all day.  Whatever pleasure your eyes may derive from the marriage, your ears will endure a greater amount of pain in the long run. The pocketbooks of those partnering with bad management are likely to see a similar 50%+ decline in their net worth.

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