In his latest interview with WCDS: Wakefield Country Day School, Chuck Akre discusses his never sell strategy, and why investors can pay higher multiples for growth companies in a low interest rate environment. Here’s an excerpt from the interview:
Akre: Then we say, and our discipline is, we just don’t want to pay too much. Paying too much, which is sort of I infer was part of what your question was, is how do you decide whether it’s cheap enough to buy or so expensive that you ought to sell it.
Number one is, when we find really good ones our experience has been it’s been a mistake to sell them even at very high valuations, you just live through it. And then at the first part the atmosphere of the cost of money at large in the world affects the valuation you can pay.
We’re in an environment today where interest rates are one percent or half a percent or 10 or 20 basis points, or maybe a percent and a half. That means that you can pay a lot more for growth in that kind of environment than you can in an environment where interest rates are eight or ten percent or something of that nature.
And you’ll see it in housing prices. You could buy a lot more house or a lot bigger farm today in which rates were percent and a half or two percent than you could a decade ago when rates would have been eight percent or something of that nature. It’s just pure arithmetic. It’s very simple.
You can watch the entire interview here:
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