I’m familiar with someone known to venture out on sunny weekend mornings to wander local garage sales. Their first target, wherever they stop, is usually to the area marked “FREE.” This is the stuff that the sellers don’t want so badly they wouldn’t even bother with a price tag.
My acquaintance is a bargain hunter. They know that there’s a chance they find something that can be repurposed or reused, that could bring them value far beyond the cost of finding it.
We here at 228 Main spend much of our research time searching for bargains, too. Occasionally, this takes us to Mr. Market’s version of the “FREE” table—things that seem so undervalued by most investors, we may get rewarded. These opportunities get to a point where things can’t possibly be as bad as people are saying (no guarantees, mind you).
But as we’ve been growing, our thinking on this has stretched a little. Sure, we still dig for the bargains of old, but we are also looking at things that our fellow bargain hunters might call “overvalued.”
When a stock is labeled as “overvalued” (by us, the financial news outlets, Wall Street…), typically the labeler is leaving out the “right now” part.
Since we’re investors, aimed at the long haul, the “right now” part is less interesting to us. Instead…
- How long does “right now” last?
- Is the price fair right now knowing that we’re buying for the next 3–5 years?
- Are we paying a reasonable price for the next… however many years of future growth?
Again, we can’t promise that future growth pans out, but a good story, an intriguing product mix, and some competent management are all things we’re considering for these growth-y companies. It’s exciting.
Clients, if you would like to talk about this, or anything else, please email us or call.
Want content like this in your inbox each week? Leave your email here.
Play the audio version of this post below:
