In his recent interview with RWH, Joel Tillinghast explained how to how a stock for 20+ years. Here’s an excerpt from the interview:
Green: But how did you hold it for so many years? I mean, you’ve held it for, what, 20 plus years already while it’s gone up a thousand-fold. That seems almost inhuman to be able to do that. What enabled you to do that temperamentally or intellectually?
Tillinghast: I think it was about four years or five years later, the earnings per share were higher than the cost basis. And this is something that I tried to push on analysts that what I really want is a low PE on earnings five years out where you’re imagining a sustainable world.
It’s not so much shipping cycles, oh my God, they could be huge, and then they go bust. So that’s not what I’m looking for. I’m looking for a huge growth in earnings and having had the growth in earnings and realized that, yeah, when I was 20, I probably would’ve liked a Monster drink a lot better than dropping no-doze into a Coca-Cola, which is what I did then.
Yeah, I probably would’ve wanted that. And it’s still, the multiple was higher, but the earnings were much much higher. They still had the same terrific management. They still didn’t have debt. So what could go wrong?
Well, growth could stop, but consumer products companies have more inertia than technology products or ladies fashions, which annoyingly have almost no inertia, at least the stocks that I buy.
One way that I presented it for the analyst was to take some of the amazing Buffett winners and said, what was the PE entry and what was the PE five years later. And was like, Geico was like one-time earnings, five years later. Wells Fargo also a single digit, even Coca-Cola was a fairly modest multiple, five years out.
You can watch the entire discussion here:
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