chapter 8
How to look at valuations
‘One of the few compasses we have are historical valuations’
My whole approach to investment is to buy shares that represent what I believe to be a valuation anomaly in the stock market and then wait for the anomaly to be corrected. Hardly ever would I buy a share where I believed the valuation appeared correct. Now, it is easier to spot an anomaly than knowing exactly when it’s going to correct and therefore I like to have time on my side. So normally I buy on a one- to two-year timeframe with, over the years, a fairly consistent average holding period of eighteen months. However, I am very happy to be patient and, if I still believe that my thesis is correct, I will wait several years if I have to. ...
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