Are some companies so outstanding that it’s worth paying any price for them? This question becomes particularly relevant when stock prices reach stratospheric heights.
In his 1997 Chairman’s Letter to Berkshire Hathaway’s shareholders, Warren Buffett highlighted Coca-Cola and Gillette as “The Inevitables.” He described these companies as ones that “will dominate their fields worldwide for an investment lifetime.” However, during that year’s annual meeting, Buffett clarified that even these “Inevitable” companies can be overpriced.
“You can pay too much, at least in the short run, for businesses like that,” Buffett said at the 1997 Berkshire Hathaway Annual Meeting. He emphasized that no matter how wonderful a business is, there’s always a risk of paying a price so high that it takes years for the business to catch up with the stock. Essentially, the stock can outpace the business itself.
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© 2024 David Mazor
Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.