An Example of Real World Value Investing Through the Lens of Dr. Pepper Snapple Group
One of the biggest dangers an investor faces when he or she decides to buy individual stocks for a portfolio is the temptation to chase something “exciting”, regardless of valuation. That’s a foolish undertaking. Valuation matters a great deal. The exact same business might be a wonderful investment at 10 times earnings but a horrible investment at 50 times earnings. It’s not enough for profits to rise, or dividends to expand; they have to offer a good return, based on what you paid, relative to a reasonable opportunity cost hurdle such as the long-term 30-year Treasury bond yield.