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Building sustainable excellence

What is the hallmark of great sporting champions? They may not win every single match, but everyone believed that they would give a stellar performance whenever they set foot on the field. The consistency of their wins dwarf the losses; and they are known for longevity, consistency, patience, discipline and managing risks by playing smartly and adapting their game to counter opponent’s strengths. This is the quality of a champion.

Similarly, in the investing world, although quality does not have any single definition, it is a confluence of consistency, longevity, patience, discipline and managing risks effectively. Quality focuses on the fundamental strengths and durability of companies rather than short-term market trends. Unfortunately, most investors often associate quality with companies that generate good returns over a short period of time. For instance, to a value investor, low valuation ratios in the hope of buying stocks well below their intrinsic value may seem a quality buy and to a growth investor, a focus on high turnover growth perhaps at the expense of profitability may seem to be a quality buy. The risk in either of the cases here could be that a low rated stock could still be expensive if the company has a poor outlook/ vision and the growth stock could remain unchanged in its space.

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