Which is more important? The business or the price you pay for it?
As we have argued before, just about any investment style can be successful, as long at the investor sticks with only one approach. “Style Drift” is one of the deadly investment sins.
At Dock Street we are dedicated to Growth. We believe that identifying businesses with long-term growth prospects offers a satisfactory way to enjoy above average returns.
A variation on Growth investing goes by the acronym, GARP: Growth at a Reasonable Price. GARP investors look for similar businesses as we do, but they are hoping to find them at lower prices than the sometimes higher prices we are willing to pay.
Sounds “reasonable”. But we have found that worrying too much about price can result in missing some rare and remarkable businesses. We tend to look at price last—after determining the quality of the business and its competitive position in its market. If we’ve found an extraordinary business, a high price might be justified.
Even Ben Graham, the father of value investing, argued that you could pay just about any price for a stock if the hoped for growth in earnings was achieved. Most of our time and energy go into tracking that “hoped for growth” rather than discovering the best possible entry point.
This can produce a bumpy ride at times. But we prefer bumpier high returns rather than smoother low returns.
Daniel A. Ogden