Stocks That Fund Themselves

In an old letter to clients, Tweedy Browne’s managers once stated that investors should be prepared to hold on to an undervalued stock for at least five years in expectation of the stock reaching fair value. Certainly, you can make the case that stocks can remain cheap for ten years or longer—Abbott Labs, Altria, and even Johnson & Johnson have proven that at different points in the past fifteen years. The only additional counsel given by Tweedy Browne is that the longer a stock remains undervalued after the five-year mark, the more likely it is that an investor is wrong about the valuation.

I don’t share the Tweedy Browne view, even though I … Read the rest of this article!