In cyclical real asset industries, few companies are 'hold forever' stocks. The strategy is to invest for a specific 3-7 year window when operational catalysts can outperform the macro cycle. Once the asset is running and becomes a pure play on the commodity, it's time to exit.
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Current real estate deliveries were financed in the 2020-22 low-rate era, causing a temporary supply glut in high-demand sectors like Sunbelt apartments. Since new construction halted in 2023, today's depressed prices offer a unique entry point before supply normalizes and rents can accelerate.
Some companies execute a 3-5 year plan and then revert to average returns. Others 'win by winning'—their success creates new opportunities and network effects, turning them into decade-long compounders that investors often sell too early.
Identifying a stock trading below its intrinsic value is only the first step. To avoid "value traps" (stocks that stay cheap forever), investors must also identify a specific catalyst that will unlock its value over a reasonable timeframe, typically 2-4 years.
Combat indecision and emotional attachment by pre-committing to sell an investment if it fails to meet a specific metric (the state) by a specific deadline (the date). This creates a pre-commitment contract that closes long feedback loops and prevents complacency with underperforming assets.
The typical 'buy and hold forever' strategy is riskier than perceived because the median lifespan of a public company is just a decade. This high corporate mortality rate, driven by M&A and failure, underscores the need for investors to regularly reassess holdings rather than assume longevity.
Simply "thinking long-term" is not enough. A genuine long-term approach requires three aligned components: 1) a long-term perspective, 2) an investment structure (like an open-ended fund) that doesn't force short-term decisions, and 3) a clear understanding of what "long-term" means (10 years vs. 50 years).
The valuation gap between public and private real estate is historically wide. Sunbelt apartment REITs trade at implied cap rates of 6.5-7%, while similar private assets trade near 5-5.25%. This disconnect presents a compelling opportunity for public market investors to acquire quality assets at a significant discount.
By extending your investment time horizon to seven years, as Jeff Bezos advocated, you compete against a fraction of the market participants who focus on shorter cycles. This long-term perspective allows you to pursue opportunities that others are structurally unable to, creating a significant competitive advantage.
The market often loses interest in resource companies after the initial discovery pop. This 'orphan period,' when the project is being built and de-risked but not yet generating revenue, is the ideal time to invest at a discount before production begins.
While having a disciplined rule like reviewing a stock after 24 months is useful, it should be subordinate to a more critical rule: sell immediately if the fundamental investment thesis breaks. This flexibility prevents holding onto a losing position simply to adhere to a predefined timeline.
