One of the perennial problems of value investors like me is my urge not to pay up , while the world is different now to the one when I started picking up 20 percent annual growers at 10 PE or less in 2009-10 there were few stocks in my journey which always looked expensive whenever I have evaluated them Kotak Bank , HDFC , NESTLE just to name a few
Prof Bakshi has a superb article why quality is almost always undervalued from 2013 you can read it here
“More profitable companies today tend to be more profitable companies tomorrow.Although it gets reflected in their future stock prices, the market systematically underestimates this today, making their shares a relative bargain – diamonds in the rough”
How can someone overcome this dilemma in a practical manner ?
This is where the concept of tail stocks comes into picture. The practical implementation can be done in 3 easy steps
- Buy 1 stock each of your desired quality company that you would love to add to your portfolio and valuation is the only reason holding you back
- Create a google spreadsheet like this
- Any time the stock action changes to “BUY” in the