Growth at (Almost) Any Price

by | Mar 8, 2019 | General

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.

Best regards,

Daniel A. Ogden

Dock Street Asset Management, Inc. is an investment adviser registered with the U.S. Securities and Exchange Commission. You should not assume that any discussion or information contained in this letter serves as the receipt of, or as a substitute for, personalized investment advice from Dock Street Asset Management, Inc.

It is published solely for informational purposes and is not to be construed as a solicitation nor does it constitute advice, investment or otherwise.

To the extent that a reader has questions regarding the applicability of any specific issue discussed above to their individual situation, they are encouraged to consult with the professional advisor of their choosing.

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Our comments are an expression of opinion. While we believe our statements to be true, they always depend on the reliability of our own credible sources. Past performance is no guarantee of future returns.