The Myth of Buy and Hold: Even Buffett is an Active Trader

via Dorsey Wright Money Management

No one can dispute that Warren Buffett is a good investor—he’s made a ton of money over many years and it’s been well-documented.  He holds court periodically and even his public calls have been pretty good, like his “Buy American. I Am.” editorial in the New York Times on October 16, 2008.  (More recently he said bonds should come with a warning label, so take that for what it’s worth.)  You could do worse than trying to emulate Warren Buffett.

So what is St. Warren actually doing?  Well, fortunately some college professors did the heavy lifting.  They analyzed Berkshire Hathaway’s quarterly filings from 2006 all the way back to 1980, 2,140 quarter-stock observations.  CXO Advisory had a nice summary of their work.  In the words of the professors:

…we observe a median holding period of a year, with approximately 20% of stocks held for more than two years. At the other end of the spectrum, approximately 30% of stocks are sold within six months.

Yep, Warren Buffett has 100% turnover.  He blew out 30% of his portfolio selections within six months, and held about 20% of his picks for the longer run.  That is active trading by any definition.

Read the rest here.