So by "company's equity" I assume you're referring to the Book Value per share of the company being higher than its current price ?But "Book Value" is much the same as the Liquidated Value of a company and the only time that a shareholder would get a benefit from the company's final Net Assets is when those Assets are distributed after the company folds. And even then, how does one know if the shareholders will actually get what the Assets show on the Balance Sheet ? But I thought that you were into this company for the Long Haul ? So being around when the company is liquidated isn't in your game plan ?
I meant market price of the equity: the share price.
I'm not so sure about that. It appears that TLRD lost -$89.6mil. in its 3Q 2020 .....
TLRD isvery much cash flow positive.
Really ? .... So if you got in Really Early into TLRD, say, in Jan. 2019 when their price was falling, and paid about $20/share, you would have been -75% down at $5/share prior to the market collapse ..... By early I mean, early getting the shares at bargain prices. A price of $20/share is around the fair value, so no upside at that price.
On the other hand, if you bought into a quality company, such as MCO, in Jan. 2019 for $150/share, you would be +80% up at 270/share at the same time .... I do not really care about quality, if I cannot get it for a cheap enough price.
..... which may, or may not, happen as planned in the future according to the "thesis". And if it doesn't, then what ? You sit with shares going nowhere.
If shares are not going anywhere, sure, could happen. Investing is about taking decision under uncertainty. Fortunately, I did limit my downside by paying little for them, so no permanent impairment of capital has occurred. Little downside, massive upside: I will take that.
IMO, one is far more likely to obtain a Capital Gain from MCO than from TLRD based on MCO's financial quality and above average business performance.
You are probably right that it is an outstanding business, probably they haave also a very good management, pristine balance sheet and strong earnings. The questions is: who doesn't know all that? Has the company just not become even more expensive?
But if the time did come when TLRD started to show an ongoing upward price move, there would be nothing stopping you from selling your MCO shares, at a healthy profit, and using the proceeds to buy into TLRD. Again, the bulk of the gains are to be made when there is the maximum amount of uncertainty, you have to anticipate, that is part of this investment game.
As a side note: your are really into Buffett's "good company's at fair prices", sure why not? But I am not into that at all, why? First, the "good company's at fair prices"-investing is extremely hard to do, at least for me. I do not about you, but I am not able to identify competitive advantages that are sustainable for long periods of time, i.e. recognizing them before anyone else in the market. Second, Buffett's best returns were achieved during his early partnership years, i.e. buying cheap regardless of quality, just cheap. That last thing, buying cheap, is something I do believe to understand. I think I might have even the right character for it.
Lots of health to you.
-- Nya -- |
