(Not directed at anyone but more to the mood prevalent in the market where apparently no price is high enough for a “quality business”)
I decided not to invest in Page Industries in 2012 when it was trading at a P/E of 25-30 since it looked expensive to me! In isolation I do look like an idiot now, but if I see the larger picture certain things become very clear -
I have made my money elsewhere, I can very well live and thrive without a “high quality conviction stock” in my portfolio. India has 7000+ listed companies and all I need at any point of time are 20 stories that can compound at a 20%+ rate over a respectable period of time
Page has gotten re rated to 60+ P/E since then but so have so many other stories during the meanwhile. Some stories that were trading at 10 P/E now go at 30 P/E, Page is not a lone ranger that has created wealth. It is just yet another stock that has done well.
I still refuse to buy the Page Industries stock since I believe the risk reward is not in favor. In short I do not like what the stock offers me but I continue to wear the chaddi they make. I can like a company’s products yet continue to dislike the stock.
I do enjoy intense debates where both sides of the argument are passionately presented supported by numbers but the passion can and will get misplaced at times.
End of the day we are all looking to make money in the markets, it really does not matter whether you make it from Page Industries or from some other stock. When you put in a lot of effort into something it is very easy to intellectualize things too much and start to put your thought process up on a pedestal. Every above average IQ guy investing in the market needs to deal with this at some or the other point of time.
When I look back over the past 2 years I do find I have been guilty of this to some extent - in the quest for differentiated insights I have ended up hypothesizing about things that just weren’t there and ended up missing things that were in plain sight. That’s how your mind can mess with you.
We need to get back to the basics and keep money making as the central objective, everything else becomes futile in the long run if you do not make money. If something makes money it is a good investment, if it doesn’t it is not. It does not matter if the business that lost you money was a high quality one. It helps to keep the objective simple and clear, else it is easy to carried away by how good an analyst you are or how great your excel modelling skills are.
I know this has not contributed anything to the current analysis on the company, bottom line is the business seems to be doing ok but the stock price is not - the big elephant in the room is obviously the valuation. This inference at least to me is crystal clear since I do not have a stake involved here.
We all (me included) need to see things for what they are, we should not see what we want to see.