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Hi weijian, in the example in the above Saber article, WB rejected MSFT not on valuation but on his low confidence in forecasting MSFT's future earnings. So I'm not actually saying that quality is more important than price.
For example, there may be concerns that ABC pte ltd may not be able to collect on its receivables, may not be able to refinance its debt, and other related cashflow issues. So if an investor does not have an answer to whether ABC is able to collect on its receivables, I will say that it is probably a sign that ABC is outside the investor's circle of competence. And before the investor looks at ABC's valuation, if the investor is conservative, I will also probably advise him/her to stop considering ABC, and move on to other stocks.
It is easy to get tempted if the valuation is really low, which is why WB always looks at the business first, to avoid such biases.
Let's say now you are looking at Chinese tech stocks because they have fallen so much. But if you are thinking to yourself, "Will mobile gaming be banned in China?" "Will further regulation cause Alibaba's e-commerce to lose its competitive advantage?" And if you have no answer you are confident of, then you probably have no competence here, and you should (if you are conservative) walk away.
For example, there may be concerns that ABC pte ltd may not be able to collect on its receivables, may not be able to refinance its debt, and other related cashflow issues. So if an investor does not have an answer to whether ABC is able to collect on its receivables, I will say that it is probably a sign that ABC is outside the investor's circle of competence. And before the investor looks at ABC's valuation, if the investor is conservative, I will also probably advise him/her to stop considering ABC, and move on to other stocks.
It is easy to get tempted if the valuation is really low, which is why WB always looks at the business first, to avoid such biases.
Let's say now you are looking at Chinese tech stocks because they have fallen so much. But if you are thinking to yourself, "Will mobile gaming be banned in China?" "Will further regulation cause Alibaba's e-commerce to lose its competitive advantage?" And if you have no answer you are confident of, then you probably have no competence here, and you should (if you are conservative) walk away.