The Power of Patience
November 8th
We prefer: large purchases (at least $5 million of after-tax earnings), demonstrated consistent earning power (future projections are of little interest to us, nor are “turn-around” situations), businesses earning good returns on equity while employing little or no debt, management in place (we can’t supply it), simple businesses (if there’s lots of technology, we won’t understand it), an offering price (we don’t want to waste our time or that of the seller by talking, even preliminarily, about a transaction when price is unknown).
Rather than chasing the latest trend or 'turn-around' situations, a wise investor values businesses that demonstrate a consistent earning power. This approach calls for patience and an acceptance of the world as it is, not as we might wish it to be.
Moreover, it is the simple, often overlooked businesses that provide good returns on equity while employing little or no debt. These unassuming companies may not make the headlines but are the bedrock of a solid investment portfolio. They have competent management in place and carry on with business models that have stood the test of time. This simplicity, far from being a handicap, is an asset, keeping us grounded in the reality of the market rather than the complexities of technology.
A clear offering price is another essential criterion. This principle goes beyond the world of investing, reminding us of the importance of valuing one's time. It discourages endless negotiations and helps focus on the real worth of the investment.
Thus, prioritizing large, consistent earners with good returns on equity, simple business models, competent management, and a clear price point can lead to more reliable outcomes. This approach values long-term success over ephemeral excitement, reminding us that in investing as in life, the quiet, consistent effort is often the most rewarding.
Copyright © 2023 by Scott Sansovich