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PILGRIM: Certainly, at this point in the cycle, yes. As a secular matter, in the technology area it seems like it's getting more difficult for a company of any sort, size or shape to maintain an advantage for long.
TIME: Ron, as a buy-and-hold guy, do you even look at tech?
BARON: No.
TIME: Eric?
MCKISSACK: Almost not at all.
TIME: O.K., so if you find a small company that's growing, buy it and hold. But when people talk about buying a few stocks and throwing them in a drawer, they're thinking about GE and IBM, blue chips that have proved themselves. And yet those are precisely the firms that may be most at risk: from technology, from litigation from things like asbestos and other challenges.
SAUTER: I think you should buy and hold, but not just the blue chips. Be diversified. There's a great argument for buying and holding the entire market forever, and that's really the argument for indexing.
TIME: But in a down market, like now, indexing doesn't work, does it?
SAUTER: By definition, if the market's going down, the index fund will go down with it, so with an actively managed fund you have a chance of a positive return. But it's an unlikely event.
BARON: With the tremendous growth in index funds, it's easier for active managers to outperform. Indexing homogenizes. The good companies and bad companies get the same P/E ratio. The investor who sees things that others don't has an opportunity, because everything is being valued the same way.
TIME: How should we go about buying and holding?
BLAYNEY: We believe in creating a core part of the portfolio using index funds and using exchange-traded funds and some actively managed funds around the edges. We've used the Dodge & Cox funds on the value side; we've used Hartford Capital Appreciation on the growth side; we've used Baron Asset on the small-growing-into-midcap side.
TIME: When do you jettison an active manager?
BLAYNEY: We consider it a red flag when we see a change in the management, and we don't look kindly on style drift. If we're buying a manager, we want him to operate in his zone.
TIME: Give us a few names we can buy and hold.
BARON: One is ChoicePoint, a database company. They know more about Americans than anyone. All the insurance companies give them data about you as a driver, a homeowner. When you want to switch your policy from State Farm to Geico, Geico has to know that you haven't just killed 10 people with your car crashing into a bus, so they pull this database, and ChoicePoint charges them. We've owned it for three years, but I've recently bought more. No. 2, Apollo Education. We've been investors for four years. Apollo is in adult education, and its core business is in teaching adults one course at a time instead of a whole curriculum. Enrollment has been growing 15% a year. We also like Polo Ralph Lauren. People view it as an apparel company, but we think of it as a branded lifestyle company. They're selling at the lower multiple of an apparel company.