Today I stumbled on this tweet:

This is stuch a powerful, crystal clear chain of thought. Probably the reason why it resonated so much with me is that I was thinking something along these lines but it was way more blurry. It probably was more of an intuition than a fully fleshed out thought.

Take Constellation Software for example. Here’s the P/E chart for the last 10 years:


Now I’m not saying that looking at a P/E is a good way to make investing decisions, and I’m not saying that $CSU.TO is a bad investment looking forward (it could be an excellent one for all I know). I’m a huge fan of Constellation and Mark Leonard, but as an investment and at this price, I’m unable to get excited about it.

Munger’s thoughts on the matter are fascinating, and I want to keep them easily accessible forever. Here’s what he says:

“It’s getting very difficult because we have a vast increase in the intellectual horsepower that’s trying to get rich by owning securities”

“They’ve bid the good businesses up and up and up and up. In America, at least, almost every great business is selling 35 times earnings or more. It is fine holding these great companies but their best value creation is behind them."

“In the past, you had all the growth plus they went from a 10 multiple to a 35 multiple – so you feel like a genius, but that doesn’t mean that it’s going to go up at that same rate in the future."

“I think all successful investment is value investing in the sense that you’re trying to get better prospects than you’re paying for."

And the best part:

“There’s no great company that can’t be turned into a bad investment, just by raising the price."

Until next time, stay cool & stay invested!