Ashwin, ankit, ajit and vivek - thanks for your comments.
@ vivek - I have read and reread that article many times. I have also however read that it is important to buy quality companies but at realistic and not obscene valuations. For example, in the book Warren Buffet’s Portfolio, he talks about always drawing a historical range of PE of a high quality stock. Most of his big bets, I have noticed were made at the lower end of the 10 year range. Poly Med has always been a fantastic high quality business - yet 3 months back it was available at a “low” PE of approx 25. How do you suddenly justify paying 50 times. Agreed there was a verdict on the patent battle but some part of that was always priced in. Same is the case with the other 4 stocks. They have always been high quality stocks. How do you justify paying twice the 10 year historic average PE for each of them. Page has been fairly well discovered in the last 3 years. Only about a year back, it was available at 30 times earnings. What has changed so drastically that it is now worth 60times?
On another note, can anyone post a DCF that they might have done on Poly med? It would be nice to see what that throws out. I just can’t make any sane DCF which justifies something like this. Even at a 15% discount rate, you would need 10+ years of 25-30% growth to justify that kind of price. Where is the margin of safety on that?
Professor Bakshi talks about instant vs delayed gratification. But I am not sure if any of us here is smart enough to look that far down the line and say nothing is going to impact this business even 10 years down the line. I have a couple of such businesses in my PF - P&G is one of them. But I am never comfortable holding on to it.
I have made a lot of mistakes in my short investing experience of 3 years. This includes picking stocks with trashy fundamentals at low PE’s and averaging bad stocks on its way down. After 3 years, I have started to at least understand on a basic level the difference between quality and trash. I know investing is a journey and mistakes are part of it but I am now trying to avoid the next mistake of investing in quality but at the wrong price.
PS: Moderator/Admin - please feel free to ask us to direct this conversation to a new thread if it is necessary.