Admission Open for My Value Investing Workshops (Offline): I’m excited to announce admissions to my upcoming in-person value investing workshops in the following cities:
- Bengaluru – Sunday, 13th July 2025
- Hyderabad – Sunday, 27th July 2025
- Mumbai – Sunday, 10th August 2025
Click here to know more and book your seat.
Seats are limited in each city. The first 20 participants can claim an early bird discount.
The bulls will often try to convince you otherwise, but let’s get one thing straight: no stock is ever truly safe.
Some businesses may look like fortresses. They generate high returns on capital, enjoy strong moats, and carry the aura of invincibility. But even the best businesses are not immune to time, competition, disruption, or human folly. Just because a company has done well so far doesn’t mean it will do so forever. No matter how great the track record, infinite valuations are a dangerous illusion.
Why? Because capitalism has a way of balancing the scales.
When a company earns unusually high returns on capital, it sends out a silent invitation to competitors. Sooner or later, capital flows in. Moats erode. Margins shrink. What looked like a golden goose begins to look more like just another bird. Over time, returns on capital tend to gravitate toward the cost of capital, especially in industries where advantages are not enduring or where management becomes complacent.
This doesn’t mean that all great companies are doomed. Far from it. Some businesses, especially those with high-quality products and services, wide moats, disciplined leadership, and sound internal cultures, can defy this gravity for long stretches. But even then, they’re not immune. The decline might be slow and graceful, rather than sudden and steep, but the trajectory of excess returns generally slopes downward.
That’s the uncomfortable truth: everything in this world is momentary. Including greatness.
Your only defense is discernment. Stick with quality. Not because it’s permanent, but because it tends to last longer than most alternatives. And those extra years of sustained excellence are what give compounding the runway it needs to perform miracles.
Yes, high-quality businesses often look expensive. And yes, you’ll sometimes feel foolish for “paying up.” But as long as you’re not grossly overpaying, and the business continues to compound capital efficiently, you’ll still do just fine.
That’s the paradox of quality: it often rewards patience and discipline, even if the entry price wasn’t perfect.
Poor-quality businesses, on the other hand, rarely give you that chance. You can buy them cheap. You can hope for turnarounds. But more often than not, there’s no happy ending. Time is the enemy of poor businesses. It only magnifies their weaknesses.
As Charlie Munger wisely said:
Over the long term, it’s hard for a stock to earn a much better return than the business which underlies it earns. If the business earns six percent on capital over forty years and you hold it for that forty years, you’re not going to make much different than a six percent return – even if you originally buy it at a huge discount. Conversely, if a business earns eighteen percent on capital over twenty or thirty years, even if you pay an expensive-looking price, you’ll end up with one hell of a result.
So the goal isn’t to find the perfect stock. That doesn’t exist. The goal is to find a good business, at a reasonable price, with a decent chance of staying good for long enough.
That’s all investing really is. Everything else is noise, narrative, or wishful thinking.
Two Books. One Purpose. A Better Life.
“Discover the extraordinary within.”
—Manish Chokhani, Director, Enam Holdings
“This is a masterpiece.”
—Morgan Housel, Author, Psychology of Money
