One of the challenges we have as investors is saying we're long term investors, while seemingly behaving in a manner contrary to that.

When we talk about investing long-term we say great businesses and great management teams reveal themselves to us over time vs. us clearly identifying them, aka "finding" them.  Another way of saying this is businesses and management teams need to prove themselves.  Additionally, as investors we have to admit when we're wrong and the faster we can do that the better.  

To continue to own things for long periods of time, the business needs to improve, the management team needs to improve.  That's not easy, things can improve on the inside w/o seeeing on outside.  Business is an "outdoor sport", so good things and bad things can be hidden for extended periods of time.  Worse, things can get worse even though the company is getting better AND when all the evidence points to things going great, underneath things can be getting worse.  A great place to hide "stuff" (bad) is doing acquisitions.  Too often everything about an acquisition will have gone great, "exceeeded expectations" until some point a few years in the future and for some reason its revealed it is a complete disaster.  BW example.

When we think about turnover then, we want to sell, less because of valuation or because stock has "had a good run" and more because we determine that we're wrong.  Thus, turnover is just a number and it doesn't distinguish between us making an error, and frantic buying/selling because some macro forecast has changed, this sector will under/out perform.  We're not trying to play the guessing game, or expectation game but rather trying to improve our decision process so we end up owning good businesses for long periods of time and exiting mistakes as quickly as possible.

Ian Cassel

I tweeted this to remind investors of the “realities” of stock picking. Some of the best stock pickers of all time were very active under the surface. You have to go on a lot of dates before you find your spouse. You have to kiss a lot of frogs to find a prince. You have to turn over a lot of rocks to find a great one, and even after you think you found one only a small percentage of those will deserve to be held for more than a year or two. How many stocks have you owned where you liked them more in 12-months? Not many right? 95% of the time you will like the business, management, stock .. less… as time goes on.