General Mills: Blue-Chip Quality Trumps Valuation

Probably the most frequently asked question that I have ever gotten from readers is some variation of this: With the recent stock price increases of the past four years in mind, does it still make sense to buy the top-quality companies in the world like General Mills, Procter & Gamble, Johnson & Johnson, PepsiCo, General Electric, Coca-Cola, ExxonMobil, and Nestle at these prices?

It’s a question that you’ll ultimately answer for yourself, but here is how I think about it: the consequences of overpaying for an excellent business and holding for the long run are quite minimal compared to almost any other financial mistake that you can make. When you are dealing with the kinds of companies that are relentlessly growing profits and dividends year in and year out, you will find that the company “grows” into its valuation within a year or so, and then it’s off to the races.

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