[ad_1]
I’ve never met a real investor who wouldn’t like to invest in a fast growing company that earns high returns on equity and capital. However, finding an undervalued great company that can compound for a long-time is hard. The question for us (which is always the question we ask) is: Can we find investment opportunities where we have a “margin of safety” from our purchase price where we feel comfortable with the management and where we are confident we understand roughly what the business/industry will look like down the road?
Many investors fumble when it comes to holding on and achieving the long-term return that the business itself delivers. Look at any stock with a great multi-decade return and don’t forget how many recessions, macro issues, temporary business missteps or urges to “re-allocate” to a slightly cheaper stock along the way, have now long been forgotten, but caused many to sell prematurely. Of course, extreme overvaluation can make anything a bad investment for a while. Microsoft roughly quadrupled its earnings from 1999 to 2013 yet that stock was down 30% over that same period, going from a 70x P/E to 9x. What’s important when selecting investments is being roughly right about the future business trends, not perfectly dissecting what already happened.
To us, a growth business with strong competitive advantages and high returns on invested capital could be more attractive as an…
..
[ad_2]
