“Valuation matters because it will affect how well you perform as an investor
over time. Buy even a high quality company at too high of a price and your total
returns will suffer, and you will also receive less yield on your money than you
otherwise should have had you purchased at a more attractive price.” Dividend Mantra
There are two things that really, really matter in investing; Quality and Value. Look around at your companies that are innovative and continue to deliver exceptional service/product with rising revenue and profit you notice one thing; quality doesn’t come cheap. You will usually pay a premium for these companies. There are many that I would love to own, but they rarely present at the price I would favor.
The quote above is from Dividend Mantra’s recent post which can be found here. I agree 100% with what he is saying and I think most of you would. Value is found at times of uncertainty and fear. I think the market is in for a correction because of what people think may or may not happen. Why worry? As Dividend Mantra says it is only noise and to the long-term investor really is of no concern. Yes, cuts may be made to government budgets and taxes on investments might be increased. Has anything changed? Investors have always had to adapt to the policies of companies and governments. I have no reason to doubt they will not do the same in the future.
The value you seek comes during times like these. The only question is how will you act? Do you let fear dictate your actions or do you follow a logical plan and buy when prices our deflated on short-term news? I like the latter approach and I’m thankful I have some capital available to take advantage of it.
I mentioned here that I would add to my shares of NSC if they dropped to 60. I did that today. I added 50 shares to my current holdings. Those shares were purchased at 59.84 giving me an average share price of 60.78. I don’t know what will happen next week or next year, but I do know that getting these shares of NSC at these prices due to recent earnings weakness and political results is far better than purchasing when they are rising.
What are you doing and why??