Oftentimes, portfolio performance can benefit from lack of action. In other words, investors may be better off simply leaving their stocks alone, and not worrying about timing the market to buy and sell at the right times.
"We continue to make more money when snoring than when active," famed investor Warren Buffett has said. On a similar note, he has said, "Our favorite holding period is forever."
With this important investment principle in mind, here are three stocks in my portfolio I almost certainly won't be selling in 2017: Tesla Motors (NASDAQ:TSLA), Facebook (NASDAQ:FB), and Apple (NASDAQ:AAPL).
Tesla Motors: Tesla is likely the riskiest stock of these three. But selling before the automaker launches its lower-cost Model 3, which ultimately represents the realization of the company's "master plan" laid out over 10 years ago, could be a mistake. While the stock's valuation has undoubtedly already priced in expectations for extraordinary growth, 400,000 deposit-backed reservations for the highly anticipated vehicle preview a potential major tipping point toward electric vehicles -- and Tesla would be at the center of this critical shift.
Facebook: Facebook stock has run into some road bumps recently. The stock has slid about 11% since the company reported its third-quarter results on Nov. 2. The quarter's results were great, but investors were spooked by management's references to expectations for big investments in 2017. Investors, however, have seen this before. In 2014, Facebook similarly warned investors of plans for big investments -- and the stock has since soared 56%.
Obviously, big spending doesn't automatically mean Facebook's stock will rise again. But the world's largest social network has earned my trust with its long-term plans as it charged forward with big investments in mobile, predicted Instagram's huge potential when it purchased it for $1 billion, and improved its native Facebook platform at a blistering speed that competition can't match.
And it's not like Facebook can't afford to get more aggressive with its spending. The company generated $2.5 billion of free cash flow in its most recent quarter alone -- up from $1.4 billion in the year-ago quarter.
Apple: Apple's revenue and EPS have faced headwinds recently, down 9% and 15%, respectively, in the tech giant's fiscal fourth quarter compared to the year-ago period. So why would I hold onto a business with financial results so dismal? Two reasons:
- The stock is cheap. With its price-to-earnings ratio of just 14, Apple stock already prices in expectations for sustained challenges.
- The scale and reach of Apple's robust ecosystem of user-friendly products has proved to be a sustainable foundation for customer loyalty, pricing power, and repeat purchases.
But beyond these reasons for holding these three stocks throughout 2017, my main motive for holding them is simply to avoid the pitfalls of market timing and to maximize my time invested in stocks. The best way I know to invest is to simply buy solid companies with long-term prospects and hold them for the long haul.
Sure, if Tesla, Facebook, or Apple begin to consistently make poor decisions, I may consider selling. But barring any major unexpected issues, I plan to give them the chance to meet -- or possibly even exceed -- my expectations in 2017 and beyond.