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Technology Stocks : The New QUALCOMM - Coming Into Buy Range
QCOM 180.90+2.1%Oct 31 9:30 AM EST
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To: petal who wrote (9070)7/28/2023 11:05:31 PM
From: Lance Bredvold1 Recommendation

Recommended By
petal

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" And while I would argue that a high valuation is not in the investor's interest, it may be (and indeed, probably usually is) in the company's interest. Because the company can do all kinds of things with that higher valuation. (That last part is probably the best reason to argue that even a truly long-term investor would prefer a high valuation to a low one.) However, most companies (i.e., most CEOs/mgmt's) don't know how to make proper use of a high valuation, thus rendering it useless. On the contrary, they instead tend to get hubris, and do still more stupid things than they usually do."

Indeed. When a company is growing through acquisition a high PE can be a huge advantage for trading your high PE for a company with a low PE and which acquires the glow of your earnings growth when it merges with you. I have stock in a regional bank which has merged with small local banks mostly N. to S. from Montana using a PE over 20 most of the time. Those little banks probably have single digit PE's and their presidents want to get out with the highest possible assets. So, why not sell out to GBCI for stock, sell the PE 20 stock for a nice profit and remain president of your bank. GBCI does not even change the names of the banks it acquires. Their annual meetings have 20 or 30 presidents all sitting in one section of the meeting room and cheering each other on.

With the scare we had in March, Glacier Bank Corp did take a significant hit and it's PE dropped to about 11 or 12. Still above the 7-8 of my other two bank holdings (USB and FNB). Those have recovered faster than Glacier but are still below it's PE by quite a ways. And they had to borrow from the FED which has caused some earnings reduction. Their PE is now headed back up and I've purchased quite a few shares around $30 assuming they'll get back in that game successfully. But they are also up to $25 billion assets. Over 10B is one of the first break points requiring more regulation. Like Buffett, the bigger they are the bigger their purchases have to be in order to move the needle.
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