The hardest thing with quality is that it rarely trades at reasonable price. In the meanwhile, you have to search for special situations and more hidden micro/small/mid caps. I prefer to keep some cash in case a big opportunity to buy quality comes.
I like how Pat Dorsey explains it. You have a earnings return (from cash flow growth) and a speculative return (P/E). The price you pay influences your speculative risk.
There's a crucial timing angle here. The real money-maker is spotting that rare company making the transition, like when Microsoft shifted from Steve Ballmer's value trap to Satya Nadella's cloud empire, though I'll admit some of my clients portfolios had plenty of battle scars from betting on transitions that never happened!
The hardest thing with quality is that it rarely trades at reasonable price. In the meanwhile, you have to search for special situations and more hidden micro/small/mid caps. I prefer to keep some cash in case a big opportunity to buy quality comes.
Indeed. For quality we do the work beforehand and wait...
Exactly. What is "expensive" ?
Back in 2016 or so they were saying a P/E ratio of 10 for certain stocks was "expensive".
Fast forward not even 10 years later, those same P/E ratios are running 45 or higher.
I like how Pat Dorsey explains it. You have a earnings return (from cash flow growth) and a speculative return (P/E). The price you pay influences your speculative risk.
"expensive" for me is when I expect less than 12%-15% annual return from an investment.
With reasonable margin of safety
thx
There's a crucial timing angle here. The real money-maker is spotting that rare company making the transition, like when Microsoft shifted from Steve Ballmer's value trap to Satya Nadella's cloud empire, though I'll admit some of my clients portfolios had plenty of battle scars from betting on transitions that never happened!
Keep up the great work,
Rick