The Business of Value Investing.pdf

170 The Business of Value Investing

businesses. The obvious ones that come to mind are Coca - Cola,

American Express, the Washington Post, and GEICO. Remember

that we are investing in growth at a reasonable price, not growth at

any price. This distinction is of paramount importance, and under-

standing it can prevent serious loss to the investor. GARP busi-

nesses, when you fi nd them, are very simple investments. You buy

them and sit still. See Table 8.3.

Even when sitting still, however, the investors ’ work is not

complete. On the contrary, once an investment is made, the work

becomes more painstaking. Determining that a security is under-

valued and suitable for purchase is one thing; ensuring that the

business remains an attractive investment is quite another. At a

minimum, investors should check on the status of the investment

quarterly along with the required regulatory fi lings issued by the

business to the Securities and Exchange Commission. The purpose

of these regular checkups is to be on the lookout for any signifi -

cant signs that the overall fundamental condition of the business is

deteriorating. Making such a determination is both part art and sci-

ence. Generally, quarterly performance should be of no signifi cant

concern if the investment made truly satisfi ed the conditions of an

undervalued one with a satisfactory margin of safety. Of course,

Table 8.3 Benefits of Sitting on Your Assets

Company

Stock Price on

1/02/1980

Stock Price on

12/31/2008 Total Return

Coca-Cola $1.40 $45.27 3,134%

American Express $1.91 $18.55 871%

Washington Post $20.25 $390.25 1,827%

S&P 500 Index 105.76 903.25 754%

Note: 1980 prices are split adjusted.

Data source: http://www.bigcharts.marketwatch.com.

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