Quote Of The Week: The Difference Between A Good Company And A Good Investment

“There is a difference between a good company and a good investment, and that’s valuation.”

David Herro, Manager of Oakmark International, at the Morningstar Investment Conference, Chicago IL, June 2018

How many times do people run across a great new product or service, and say “Wow! What a phenomenal company! I should take a look at buying some shares of that for my portfolio.”

We’ve all been there. That’s why I was completely struck by this deceptively short and simple quote above from David Herro, renowned manager of Oakmark International, while I was at the Morningstar Investment Conference in Chicago a week ago.

Herro is a repeat winner of Morningstar’s International Stock Fund Manager of the Year award, as well as Morningstar’s Manager of the Decade. Why? The Chicago-based manager has shown that stock-pickers can beat the indexes, and significantly so, over the long haul.

Herro is a value investor, focused with laser-like precision on the true value of a company. Value investors aren’t just content picking great companies. They’re looking for great companies at great prices. If it’s not on sale, they’re probably not interested. That’s why valuation, or the price you pay for the investment, is key.

Herro has had some pithy comments over the years about how market declines – like Brexit, or even today’s much smaller 300+ drop on the Dow – can provide valuable opportunities to value investors. Herro reminds us that macro events, like Brexit or the trade war, move prices, although the fundamentals of the underlying stocks haven’t changed very much. Long-term value investors can take advantage of price dislocations to swoop in and snap up some bargains.

Keep that in mind as you watch the financial news. Daily market “noise,” if you let it get to you, can distract you from your goals. If you’re smart, let the noise distract other people, so you can profit from their market mistakes.


We’ve focused on this particular manager and fund to illustrate a valuable investment principle. However, the information provided here is for general informational purposes only, is not an endorsement, and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

About Mari Adam

Mari Adam, Certified Financial Planner™ has been helping individuals and families chart their financial futures for over twenty-five years. Have a question about your financial situation? Ask Mari!

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