A tale of 2 companies, a tale of 2 stocks
Buying a good company is only one part of the challenge. The price you pay matters.
This will be a quick one. I’m going to link to two recent Substack articles which caught my attention.
Huge disclaimer here - I am not recommending a purchase or sale of either of the stocks mentioned, they are noted for illustrative purposes only.
The first is a detailed writeup on Visa. If you want to learn about a company with one of the strongest competitive moats in the world, it’s worth reading. Giuliano at
takes a detailed look at the company in an approachable, understandable way. And while Visa stock isn’t necessarily cheap in the traditional sense (it rarely has been), one can make a strong case for owning it.The second is a commentary on Nvidia, one of the market’s hottest stocks. Nvidia is another great company with strong competitive advantages… and a stock price to match.
pulls no punches in explaining the (very high) expectations baked into the stock at its current price.How is this relevant to Low Risk Rules?
I was struck by Roiss’ use of Cisco stock to explain what might await buyers of Nvidia at these levels, because I also used that company to demonstrate the futility of chasing growth as a stock investor. Even though Cisco was a long-term winner (as Nvidia also seems poised to become), the ride was a relative disappointment for many investors.
You might recognize the following chart from the book, in which I compare an investment in Cisco to boring old TD Bank over the decades. I even gave Cisco a head start, buying it well before the telecom bubble blew its valuation up to ridiculous proportions. And TD still won.
At times like this it’s critical to understand what you’re paying for today’s earnings, as well as tomorrow’s. Low Risk Rules references the research that explains why growth investing is so difficult to execute successfully. I’ll review that in a future post, so please subscribe if you don’t want to miss it.