is there too high a valuation to pay for even the greatest company? we had this discussion around the virtual office this week. I think a natural reaction is to say, yes. But here's why I think the answer is a wishy washy no:

we have all the seen the chart showing that you could have paid 200x earnings for great company x over 40 years ago and still have achieved a very good compound return.

and there are a lot of examples of those kinds of companies - see 100 Baggers by @chriswmayer - some will argue that those are cherry picked - but as a good friend told me, as an active manager, we are paid to cherry pick

if you are going to pay a high price for the future potential, you better be right on the quality of the business, the management and runway of growth for the company.

you also have to know yourself as an investor. Can you live through massive drawdowns? Because bad stuff is going to happen and if you sell out at every pain point, you will never compound at high rates.

few are able to hold over the long term, we aren't hard-wired that way and most will trim back a big performer in their portfolio anyway. If you are managing other's money, you most definitely will.

but I am working hard to fight the urge to do something. As Will Danoff said, are things getting better or are they getting worse. If they are getting better for an investment, why sell? And the power of compounding at high rates can make up for a lot of mistakes

so I believe that a basket of high quality companies growing their free cash flow per share over time is the best approach for me. I don't have the wiring yet to pay any price for a great company but I'm not ruling it out either.