Warren Buffett famously quipped that his favorite holding period is forever. Now, that doesn't mean he makes an investment and forgets about it -- he recently sold Berkshire Hathaway's position in Gap (NYSE:GPS), for example. No, he continues to do his due diligence on each stock he owns, but he gives them adequate time to fulfill their potential.

Case in point: Buffett has never sold a share of Washington Post (NYSE:WPO). In 1973, he made an $11 million investment in Washington Post. His stake today is worth $1.3 billion.

But it hasn't always been smooth sailing for the media giant. From July 1998 to December 2001, Washington Post stock lost 4% as investors turned their attention to the favored tech stocks of the era.

There weren't any major problems at Washington Post -- tenured management remained intact, the company churned out free cash flow, and revenue continued to grow. The whole newspaper industry was simply out of favor during this period. Buffett recognized this and remained confident in Washington Post's prospects.

His patience has been rewarded -- Washington Post stock continues its steady climb and is up nearly 40% over the past five years. Many tech stocks, like Nortel Networks (NYSE:NT), on the other hand, have yet to regain their pre-2002 prices.

Another example
In August 2002, Fool co-founder David Gardner was impressed by video-game maker Activision's (NASDAQ:ATVI) revenue and net income growth, its large cash hoard, and its popular Tony Hawk franchise, so he confidently recommended the stock to Motley Fool Stock Advisor subscribers.

Everything about the company seemed to indicate higher returns, but just six months later, the stock was down nearly 50%. What happened? Wall Street analysts broadly downgraded gaming stocks out of fear that there weren't enough short-term catalysts to fuel industry growth. Nothing was wrong with Activision's business, margins remained strong, and the company continued to turn out free cash flow, but the market didn't seem to care.

The market punished the stock hard, but David remained confident about its long-term prospects.

In February 2003, David re-recommended Activision to Stock Advisor subscribers and reminded them that "patience is key" and to invest in Activision with a time horizon of years, not months.

That was sound advice. Since the second recommendation, Activision shares have jumped 370%, greatly rewarding patient shareholders.

It happens to the best of 'em
Washington Post and Activision aren't unique examples. Take a look at the five-year charts for Starbucks (NASDAQ:SBUX), CarMax (NYSE:KMX), and Abercrombie & Fitch (NYSE:ANF), and you'll see yearlong stretches where the stocks were out of favor with the market. Despite these temporary setbacks, each stock has returned more than 20% per annum since 2002.

As my colleague Tim Hanson has noted in the past, the one thing all great stocks have in common is unpredictability. Even the market's best stocks have hiccups along the way. The key is to find a great business and be patient. The cream will always rise to the top.

But finding great businesses is easier said than done. A good place to start is to look for companies with significant insider ownership, little or no long-term debt, and substantial cash on hand. These are some of the traits that David and his brother Tom look for in companies they recommend to Stock Advisor subscribers.

Their strategies have worked: Since April 2002, their picks are beating the market by 40 percentage points. If you're interested in seeing all of their picks and receiving two new ideas each month, consider a free 30-day trial to Stock Advisor.

Todd Wenning owns shares of Starbucks. Activision, Starbucks, and Gap are Stock Advisor picks. Berkshire Hathaway, Gap, and CarMax are Motley Fool Inside Value picks. The Fool's disclosure policy reminds you that all we need is just a little patience.