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The book Warren Buffett and the Interpretation of Financial Statements argues, that buying a fairly priced stock is a good investment if the underlying company is a good one (according to Buffett's standards).

What is the rational behind this? I can think of two.
1) Buffett expects higher growth within the franchise than is priced in by the market.
2) http://www.quora.com/Stocks-financial/Do...pected-too

I would be grateful for comments! Thanks.

(19-01-2014, 11:52 PM)LVidos Wrote: [ -> ]The book Warren Buffett and the Interpretation of Financial Statements argues, that buying a fairly priced stock is a good investment if the underlying company is a good one (according to Buffett's standards).

What is the rational behind this? I can think of two.
1) Buffett expects higher growth within the franchise than is priced in by the market.
2) http://www.quora.com/Stocks-financial/Do...pected-too

I would be grateful for comments! Thanks.

The magic of the compounding, is an important factor.

A company with ROE of 20%, will double in price with same valuation in 3-4 years, if the profit is reinvested consistently. Of course it must be a good company which scale up linearly.