Thanks for those articles.
The way I look at it, there are different classes of investors, each with their own characteristic attitudes, who might own a stock at any given time:
1. Momentum Investors, who buy a stock because it is going up, and sell it when it has stopped going up (hopefully before it's crashed too far). They pay no attention to valuation parameters. "Don't fight the trend" is their motto.
2. Enthusiasts, who buy the story. If a company is going to be making the NextTechGismo that everyone wants, Enthusiasts buy the stock. They, also, don't care whether the stock is at a PE of 20 or 200. "You can't pay too much for a good company" is their motto.
3. Value investors, who buy a company with a low PE, low P/S, low P/B. Growth-At-A-Reasonable-Price investors are a sub-catagory of Value investors. "Don't pay too much" is their motto.
During the market bubble of 1999-2000 (or perhaps the bubble began in 1995 and is still going on), Momentum and Enthusiasm was the way to make money. Value went out of style, because it didn't work for a prolonged period. IMO, the longterm history of the market is that Value investing works better than the other 2 methods. And we are now returning to more normal market conditions. IMO, the Gorillas will never regain the P/E and P/S heights they reached in the recent past. 1999-2000 and 1925-1929 are twice-a-century anomalies. IMO, going forward, it is best to buy a stock when the Momentum and Enthusiast investors have given up on it, and only the Value investors are left. IMO, the best method is to use the Gorilla Game rules to pick which stocks you will invest in, but use Value rules to decide at what price you'll buy.
There is no point in talking to Enthusiasts or Momentum investors about Value, as long as their methods work. They are not amenable to persuasion, as long as they see their portfolios going up and up.
In 1999, and in 2000, this thread was 100% Enthusiasts. Mike B. and UF still are Enthusiasts. This is just my observation, please don't react with outrage or ridicule. |
