📖Warren Buffett
Never Sell Wonderful Companies
Hold exceptional businesses indefinitely.
When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.
🏠 Everyday Analogy
📖 Core Interpretation
Never sell wonderful companies is not blind holding. It is a rule for protecting compounding. A business with durable advantages, strong reinvestment options, and disciplined management can create far more value over decades than most investors model. Constantly trading such assets usually shifts return from the patient owner to taxes, fees, and timing mistakes.
💎 Key Insight：Time is the friend of the wonderful business.
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❓ Why It Matters
Many investors sell winners after moderate gains or short term overvaluation. They may avoid one drawdown, but they also surrender years of business growth. With exceptional companies, the larger risk is often premature exit, not volatility. Ignoring this principle leads to portfolio churn, weaker after tax performance, and repeated regret from watching former holdings compound without you.
🎯 How to Practice
Define wonderful before you buy: durable moat, high returns on capital, resilient cash generation, and trustworthy capital allocation. Write sell triggers in advance: moat erosion, governance failure, or structurally weaker economics. If none appears, hold through normal volatility and review the thesis on a calendar schedule instead of reacting to daily price moves.
⚠️ Common Pitfalls
Treating every short term valuation premium as a mandatory sell signal.
Confusing never sell with ignoring clear fundamental deterioration.
Rotating out of compounders just to chase fashionable themes.
📚 Case Studies
1
Coca Cola as a multidecade core holding (1988)
Berkshire began building its Coca Cola position in 1988 and then held it for decades rather than trading around price swings.
✨ Outcome：The position became a long term compounding engine through business growth and cash distributions.
2
American Express after the salad oil crisis (1964)
Buffett invested in American Express when the crisis pushed sentiment down but the core franchise remained intact.
✨ Outcome：As the franchise recovered, long holding periods produced much better results than short term trading.
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