Devina Mehra: the art of storytelling can turn into an investment pitfall, even for veterans (opens the source in a new tab)
- We respond to stories, not statistics. A fund manager’s tale of great brands and endless growth persuades people, but the market doesn’t care how well a story is told.
- Valuations assume earnings grow forever, yet of 4,000-plus stocks listed in India only 17 have grown profit every year for even a decade: just 0.4%.
- Warren Buffett held his Coca-Cola story too long: from its 1998 high Coke has returned about 4x with dividends, against 6x for Pepsi and 11x for the S&P 500.
- 0.4%
- steady 10-yr growers
- 4x
- Coke since 1998 high
- 11x
- S&P 500, same period
Why it matters Before you buy, test the story behind the stock and imagine other endings.
Other side Conviction also stops investors panic-selling, and long holds of great companies have built fortunes. Where does a sound thesis end and a story begin?
Source:Mint (free to read) ↗