1) The holy grail investment, at least in our opinion, is a tremendously high-quality company with an exceptional management team at a remarkably cheap price. A long runway to grow is a big plus as well. Of course, finding a holy grail investment is rare.

2) Not only are there typically trade-offs between these variables but the evaluation of each factor is subject to interpretation, which is exactly what makes the whole investing process so interesting and fun.

3) It usually is not very difficult to recognize that some businesses are better than others. What makes investing so difficult is the market attempts to value a business to the point that no longer makes it an attractive investment.

4) Stock prices reflect the market’s set of expectations for the underlying company’s future performance. In order for a stock to generate excess returns, the company’s results have to exceed the expectations embedded in the stock price.

5) At the end of the day, we are trying to form a general range of probable long-term expectations (think 10+ years out) for specific companies and then find situations where the market appears to be significantly underestimating those expectations.