Good buy, great buy, screaming buy

Do you like margin of safety?

I bought Adobe on March 19, 2025, at a PE of 25.6. A good buy — a strong business with a reasonable price. I was satisfied with that, as long-term outlooks were great. By the end of the year, the multiple had compressed into great buy territory. Today, at roughly 11x, it’s sitting in a zone that could turn out to be a scream buy.

I got the business right, but got the momentum wrong. I was happy with the good buy result, so that’s all I had. I had to come back and add to the position later to “catch up” for entering too early.

This is the lesson behind three categories of stock you’ll experience as a buyer.

Good buy. Often called “a no brainer”, as you pay a reasonable price for a great business. That’s exactly what Adobe and Novo were last year. But the stock could go anywhere within a year. Your money can be stuck with no progress: not the best for psychology. After a few years, if you are patient enough, you can get easily 20% per year on those.

Great buy. The ratio between potential loss and potential upside turns clearly in your favor. You’re paying an attractive price for an excellent business at a moment when sentiment is depressed.. This is the zone where discipline is enough. It’s Alphabet on April 25, at 17x earnings in the middle of the AI-disruption scare on Search.

Screaming buy. A market anomaly, like Meta and Netflix in 2022 — both crushed in the same bear market, both recovering into some of the best returns of the decade (Netflix is almost a 7-bagger in 3 years). This is the dream every investor chases — and it’s rare, and brutally hard to catch, because it shows up in the middle of panic, exactly when most people have no cash left and no stomach to act.

Example with Netflix in 2022

• With a buy in the good buy zone ($60), and a sell in may 2025 ($120), you made 25% CAGR.

• With a great buy ($40), you made 43% CAGR

• With the screaming buy zone (20$), you made 80% CAGR.

If you just buy and hold, your performance tends to the long term rentability of the stock, with probably no more than 25% CAGR (which is already excellent on the long term).

The general guide: For an exceptional business with intact fundamentals, a PE in the 15-19x range is usually a reasonable marker for great buy territory; below that, you’re approaching the screaming buy bar. Take a step back before clicking the button. I bought Microsoft with a PE of 22 at the end of June, I think it’s a great buy. Adobe would be there with a PE of 14. A scream buy is a market anomaly — rare, and confirmed only after the fact.

What I take from this: I’ve raised my own bar. I used to settle for good buys. Not anymore. The Adobe experience — being satisfied too early, then having to come back and add to the position to correct for it — taught me that patience has a cost when you skip it, even when the thesis holds. My new standard for any new position: great buy, minimum. As long as the opportunity of a great buy, I will stay with my portfolio and continue to investigate. I won’t add positions for the sake of diversification.