Caveat: Please assume that all the shares that I mention (ever) are in my portfolio. Or that I have a trading position. I may even have a short position in some of the competitors..or in the same shares mentioned.

Why does a person buy shares? to earn money – by selling at a higher price right? So today if an investor buys a Colgate, Gillette, or even a Maruti he should expect to double his money in 5 years because he is SURE to double his money in 7 years in the bond market. Of course bond interest is taxable, but let us ignore that for a minute. I am convinced that there are enough debt mutual funds where he/she can get 10% return on a 5 year basis if not on a 7 year basis.

A share like C, G or M are attractive in a weak market leading to a bearish feeling, because Quality is always likely to do well in a bear market. However what is the PE of all these shares? it is 44, 94, and 27 respectively. So are these shares at a mouthwatering pe? I do not think so. Of course the Roce, Ronw, and FCF of all the 3 companies are great, but then who is talking about whether these are good companies? Of course they are. The question is “will it double in 5 years”. That is a question which is difficult to answer. Remember that the dividend yield in all the 3 companies is not high enough to warrant a decision to buy.

One important way to look at them is also to ask “In 2024 will I regret that I did not buy C, G and M” – that is a far easier question to answer. Assuming that there is no PE expansion for all the 3 companies will the companies be able to grow at 15% (my target return) over the next 5 years. You can more or less write off that possibility for all the 3 mature companies. Remember that if you are an individual investor you do not need to invest all your money in equity at all points in time. So you can take a  ‘non equity’ call at this point (saying it is possible, not suggesting). Over the past 1 year gold has not been a bad performer. So yes those options can also be considered.

I was going through the portfolio of a fund manager who I like to follow. As I sorted through the holdings, I  came across many high-quality names that are also on my possible buy list. There was no doubt in my mind that these were good businesses. My view about our fund managers does not change. All of them are good business analysts, but not really good value pickers. My question was simple – these are good businesses, But were they selling at good prices? Many of the businesses were mature companies with low-to-moderate growth rates. However, their valuations implied above-average, and in my opinion, unrealistic future growth rates. As such, while I concluded they were in fact good businesses, I did not believe they were selling at good prices. And I do not mind sitting on cash. I don’t mind looking like an idiot for a real long time.