In his latest interview on WealthTrack, FPA,s Steven Romick discusses a number of topics including how growth stocks can bail value investors out of a lot of problems, but not at any price. Here’s an excerpt from the interview:
Q1 2021 hedge fund letters, conferences and more
Steven Romick: Growth Can Bail Value Investors Out Of A Lot Of Problems
Romick: We’re value investors. It’s a fuzzy line that separates growth and value. We’ve always preferred to own businesses that were growing businesses. In the traditional sense of value, the Graham and Dodd definition of value, you had the protection of the balance sheets. You had hidden assets on the balance sheet, maybe assets in the form of real estate, could have been intellectual property, or the potential for a legal settlement. Something along those lines.
We came to realise over the years has been that a margin of safety is just understanding what the value of that asset is and it can show up in the value of the business. So you can judge what you think that business is worth today and into the future and growth can bail you out of a lot of problems. Nothing is forever, nothing.
And so we spend out days trying to figure out what businesses are going to thrive down the road. In doing so we are very sensitive to understanding what will do well in the future. Understanding what the competitive threats might be today and tomorrow. How they might be disrupted. And make sure we’re paying a fair price for those businesses. There’s different levels of growth within our portfolios.
You can watch the entire interview here:
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Article by The Acquirer’s Multiple
