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Don't Sell This Stock. Ever.

http://www.fool.com/investing/general/2010/02/10/dont-sell-this-stock-ever.aspx

Nick Kapur
February 10, 2010

Legendary investor Philip Fisher bought a little radio company called Motorola in 1955 and pioneered a revolution. The guy did his homework, exercised a good deal of discipline, and found himself with a stock that multiplied many, many times -- all while sitting on his rear.

Sounds pretty nice, eh?

In today's volatile and troubled markets, taking your hands off the wheel is probably the last thing you want to do. And just like you, I fight that same fear. But that's precisely what you should be considering it right now. Today may just be the single best time to find a great company, invest in it, and then sit on your butt -- instead of fretting, trading, and losing sleep.

Good story, but how?
I've written before about the decision to chuck your stocks into the wastebasket. But that advice may not be entirely helpful -- especially when the market's already tanked. What you really need is to avoid the kinds of stocks that put you in that situation in the first place. After all, if you're in a situation where you have to sell a stock because it has problems, it's too late.

To get around that problem, you need to get to know a man buried in an obscure cemetery in the Kreuzberg section of Berlin, Germany.

Man muss invertiren, immer invertiren
In case your German is a bit rusty, the expression translates to "One must invert, always invert." It's credited to the mathematician Carl Gustav Jacob Jacobi, who taught us to make a habit of reversing difficult equations to arrive at the solutions behind them.

Let's take Jacobi's idea and apply it to our current situation.

Instead of thinking about when to sell, perhaps the more intelligent question to ask is the inverted one: When should we never sell? The answer leads us to the "sit on your butt" philosophy that has worked so well for many of history's finest investors.

If we can identify a few businesses that investors should never have sold, we can work backward to extract a few salient characteristics and then use them in our search for the next never-sell investment.

History's lessons

Case No. 1: Berkshire Hathaway
Overall return, 1964-present: 362,000%
Lesson: Top-flight management

Of all of the advantages that Berkshire Hathaway has going for it, the most obvious begins with two men: Warren Buffett (who needs no introduction) and Charlie Munger (vice chairman of Berkshire and chairman of Berkshire lookalike Wesco Financial (AMEX: WSC  ) ). Without the two of them, Berkshire would probably be a now-defunct textile mill. With them, it's been an absolute powerhouse of a company, investing in greats like Procter & Gamble (NYSE: PG  ) and Johnson & Johnson (NYSE: JNJ  ) ... which goes to show: We should absolutely demand fantastic management.

Case No. 2: Altria
Return, 1970-present (including dividends): 96,750%
Lesson: Undeniable consumer-facing trends

Regardless of how you feel about Big Tobacco, you have to admit that Altria is so successful because it runs a business built on a fundamentally consumer-driven -- and highly addictive -- product. Competitors like Reynolds American (NYSE: RAI  ) do the same thing, but plenty of non-tobacco companies display similar characteristics as well -- does Yum! Brands (NYSE: YUM  ) ring a bell? We definitely want a business that appeals to consumers' most basic interests.

Case No. 3: Apple (Nasdaq: AAPL  )
Return, 1984-present (including dividends): 6,300%
Lesson: Agility

Not all companies need to innovate to be great, but the vast majority need to be able to read the market, react, and be ahead of long-term trends. Apple has had to adapt to a shifting marketplace numerous times, especially throu