Markets
The myth of the catalyst
We're often asked what will make a holding work. Usually the answer is time.
"But what's the catalyst?" is the question every value investor learns to dread. It assumes a cheap, good business needs an event to be noticed, a deal or a disposal or an activist, and that without one the discount lasts forever.
Sometimes a catalyst helps. But the most powerful one is the dullest: a good business simply carrying on being good, quarter after quarter, until the price has no choice but to follow the value. Earnings compound. The discount closes. No announcement required.
Waiting for a catalyst usually means paying up for one. We would rather buy the boring compounding at a discount and let time do the work an event would only have done faster, and more expensively. Patience is the catalyst. It just never sends a press release.
The views above are the firm's own and are provided for information only. They are not investment advice, nor an offer or solicitation to invest. Capital at risk; the value of investments can go down as well as up, and past performance is not a guide to future results.
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