I typed up a post essentially trashing “compounder” investors who buy stocks that have already had dramatic multiple expansion on small dips. But thought, hey, let’s not put that negative energy out in the world.
To that end, I just want to remind myself of a few core tenets to put the odds on my side.
- Purchase price matters. Good absolute going in valuations (e.g., 10% earnings yield) give optionality to higher multiples in the future.
- Growth matters. Ideally companies are far larger in 10 years versus today.
- Management matters. When things go bad, management who makes lemons from lemonade create a lot of value.
To that end, I feel like, which isn’t always the case, that there are a number of companies that fit these metrics today that offer a nice opportunity to nibble.