Every business, no matter how wonderful, has a few hairs on it. And if you don’t think that’s true, it’s only because you haven’t looked hard enough.

But some hairs are, well, hairier than others. 

It’s not ideal to see the CEO of one of your favourite companies sell shares right before an opportunistic capital raise, but that may be more palatable than selling $17 million worth of shares during an ACCC investigation. (No names mentioned, of course…)

As an investor, you certainly need to draw the line somewhere. But if you hold companies and their executives to too high a standard you’ll never invest in anything. It’s about ensuring any negatives are not too egregious, and more than offset by the positives.

At the same time, companies that are squeaky clean, with loads of positives can still end up being ordinary investments. The reason being is that the market is often (but not always) aware of all the good stuff, and has priced it in.

As Charlie Munger says, no matter how wonderful [a business] is, it’s not worth an infinite price.

Ironically, sometimes companies with lots of hairs can — occasionally — be exceptional investments. Just as the market can unreasonably bid up great businesses, it can also unfairly discount the less appealing ones. 

Telstra (ASX:TLS), whose earnings have been steadily on the wane for years, has provided a 40% return for investors over the last 3 years — before dividends. Myer (ASX:MYR), which is a shadow of its former self, has seen it’s shares nearly triple in the same period.

Many would argue that companies like CSL (ASX:CSL), Objective Corp (ASX:OCL) & Xero (ASX:XRO) are far superior organisations, but all of these have seriously underperformed Telstra and Myers since 2020.

The point is, perfect can be the enemy of the good. And even the good can be bad if the price isn’t right.

Investing is hard.

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