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The Quality Pulse | Issue 7

Would You Still Buy It Today?

The endowment effect, portfolio discipline and why existing holdings need to compete with new ideas

Every portfolio review eventually returns to the same question: if the money were in cash today, would this share still be an attractive investment? It sounds simple, but the answer requires looking beyond the original investment decision. Businesses evolve, valuations change and new opportunities emerge.

Ownership shifts the reference point. In classic experiments, people given a mug asked more to give it up than others were willing to pay for it. Investors show the same pattern: a study of 10,000 brokerage accounts found they realise gains far more readily than losses. Even professional investors are affected – a 2023 study of institutional portfolios found skill in buying, but selling decisions weaker than random benchmarks.

A fair contest makes the point concrete. Visa and Mastercard both reported 14% net revenue growth for the quarter to 30 June 2026. Yet one number cannot pick the winner: revenue mix, regional exposure, regulatory risks and valuation differ, and a headline growth rate cannot reveal what the share price already assumes. The more accurate comparison is forward-looking, not anchored to the original purchase price.

The owner’s test

For a long-term quality investor, this calls for a disciplined review: has the competitive advantage strengthened or weakened? Are returns on additional invested capital still attractive? What expectations are reflected in the current valuation? Does the position remain an appropriate allocation of capital compared with the alternatives, after taxes, transaction costs and portfolio risk?

A good investment decision does not remain good merely because it was good when first made. The aim is not to trade more. It is to ensure that every holding continues to earn its place.

Conclusion

Ownership changes how a holding is judged, not what it is worth. Existing positions deserve the same forward-looking analysis as new ideas. Not more trading – but every holding has to keep earning its place.

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This document has been prepared solely for information and advertising purposes and does not constitute a solicitation offer or recommendation to buy or sell any investment product or to engage in any other transactions.

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