Buying a business in decline is psychologically difficult. It can also be extremely damaging to your finances.
There are exceptions, of course. The RHG example has been talked to death over the years but the mortgage lender was one business that generated wonderful returns for investors despite shrinking into oblivion. More often than not, though, Charlie Munger’s words ring true: “It is hard to pay a low enough price for a business in decline”.
While we are renowned for investing in unloved and beaten up sectors, we also try and avoid becoming further evidence for Munger’s wisdom (see the webinar below for a detailed discussion on narratives and anti-narratives).
Here are a few things to look for when filtering through the rubble of an unloved sector. Continue reading “Finding Treasure in the Antinarrative” →