by winston » Wed Jan 08, 2020 9:36 pm
No Stock is Safe
by Vishal Khandelwal
The bulls may want you to believe this but no stock is safe.
There are businesses that may remain good (earning return on capital greater than cost of capital) for some time, maybe a long time but you must not attach infinite values to them.
This is because high returns attract competition, generally causing return on capital to move towards the cost of capital.
While such companies may still earn excess returns, but the return trajectory is down.
Everything in this world, after all, is momentary. So, your best bet is to just stick with quality (even that is momentary, just for longer moments that allows time for compounding to work its magic).
The good thing about high-quality stocks is that you can pay up for them (never overpay), expensive looking prices, and still do well till the underlying businesses remain good.
With poor quality, most probably, you have no hope.
Source: Seeking Alpha
It's all about "how much you made when you were right" & "how little you lost when you were wrong"