Buffett on When to Sell

Buffett on When to Sell

Warren Buffett: The Billionaire Next Door
Airs Monday November 20, 2006
on CNBC, at 8 & 11pm ET

This is a segment of an interview by CNBC's Liz Claman with Warren Buffett, in which they discuss "his gut instincts, his feelings about Wall Street, how he feels when he does a deal, his surprising view about his own tax rate, the music he listens to, the TV he watches."

This particular clip above is brilliant:

"We do not sell good businesses at overvalued prices, we don't get rid of businesses that are mediocre. If they're destined to continuously lose money we get out of them...If they're gonna lose forever."

Buffett seems to be explaining here just how much he stands by his initial convictions: his original decision to buy the stock/company in the first place. And this is how it should be for the value investor. If your initial reasoning was sound, and you bought a good company with a sound business plan, strong financials, and little debt at an undervalued price - you should not be bothered if the price goes down further. In fact - in some instances this is exciting, for it may mean a potential acquisition and/or increased insider buying is in the cards.

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