Probably the largest aggregate losses are suffered by people who invest overenthusiastically in a basically sound company. — Ben Graham

I was reminded of Graham’s quote after hearing something Joel Greenblatt said at a recent conference:

I’d like to own a great growth company that’s gonna continue to grow forever and there are some extraordinary companies out there that will continue to do well. I would say…people think there are a lot more companies that rhyme with those few companies that can do that, then there are, in reality. There probably are a few great businesses like that, and I’m not gonna argue that they’re great — I have to figure out which one’s they are first — but there will be some winners. And you’ll know their names because they won.

Sometimes the market views stocks through rose-colored glasses. It prices companies as if they’ve built an impregnable moat around them and they already won. Really, it’s an illusion. Continue Reading…