What is cheap may not be good
After years of investing, Warren Buffett learnt that given a choice, he would prefer a good company whose shares are available at moderately higher valuations to an average company whose shares are available at attractive valuations.
Reason? According to him, time is the friend of a good business and the enemy of a bad business and hence, a good company will continue to grow well into the future. And despite paying a slightly higher price for a good business, one would be able to extract a good return from the investment.
But please bear in mind that the key words here are 'moderately higher valuations' and not 'excessively higher valuations'. An average company on the other hand may remain that way for years and despite paying a low price for it, may not yield attractive returns.
Warren Buffett put it best when he said, "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."
Image: New one-dollar bill notes pass through a printing press at the Bureau of Engraving and Printing in Washington, DC. | Photograph: Gabe Palacio/Getty Images Alex Wong/Getty Images
Also read:
New BMW uses fabric instead of steel!
Advertisement
