An important lesson that has probably taken me too long to pick up is that corporations with leveraged balance sheets tend to have a management culture that will perpetuate those leveraged balance sheets even as conditions improve and profits increase.
The reason why I made the mistaken belief otherwise is because I try not to overweigh the natural ebbs and flows of the business cycle. Every day, there is information blasted at the investor.
If the price of coffee beans rises by 10%, what does that say about the future profit margins at Starbucks? If oil is up 15%, what does that say about Chevron? Doesn’t a $1.2 billion settlement impair the fair value of Wells Fargo? Each of these news items meet the definition of “material” but aren’t really determinative of whether those stocks will be great corporations to passively hold for the next decade.