#investinglessons // Years of investing in the stock market has a special effect in humbling the investor and broadening his/her horizons like never before. When I first started out, I would have never bought a stock at its all time high ...
2) Regardless of how much I fancied its underlying business. Books that I had read ingrained me a desire to find “undervalued” companies, not “overpay”, & have a “margin of safety”. As a result, I picked many “undervalued” companies that were of poor quality.
3) These companies continued to stay “undervalued” for many years, lagging behind higher quality companies that continued to post even higher 52weeks highs. I ended paying huge opportunity costs in holding them despite my low entry price.
4) It took me years to realize that often there are good reasons why certain (non-cyclical) companies stay all time highs - Re-ignition of revenue growth in new markets, mega industry-wide tailwinds on their backs, unique culture to drive innovation, moats..
5) No wonder winners continue winning. Since they have found that perfect formulae to power ahead (for a long duration), why shouldn’t they be valued at a premium compared to other lower quality companies? Indeed, they should be!
6) This has led Warren Buffet to declare that he would rather pay a fair price for a wonderful company, than a wonderful price for a fair company. Scrimping on pennies to get lower entry points has cost me grands in the long run.
7) I now endeavor not to miss the forest for the trees. If the business is excellent and not ridiculously overvalued, it should provide you far greater margins of safety in the long run than favorable entry points in the short term. #stocks #investing
