I believe that successful long-term investing in stocks implies investing in the greatest businesses as you can identify. However, it is important to recognize that there can be a distinction between a great business versus a risky stock. The differentiator, as always, is valuation. You can overpay for even the best company, and by doing so earn poor returns. Most importantly, this can occur even though the company itself performed as expected or even better than expected. Valuation matters and it matters a lot. The key to understanding the importance of fair valuation is to recognize that it empowers you to fully participate in the success of the business itself. Overpay and you earn less than the business does. On the other hand, if you can invest in the business at a bargain, you can earn more than the business does - and best of all do so at lower risk. This video is all about the risk of overpaying for even the best companies.
FAST Graphs Analyze Out Loud Reviewing Nike (NKE) and Disney (DIS)
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