"With the risk of hyperinflation, cheapness doesn't matter," he said. "Who cares about price/earnings, price/book value, EV/EBITDA or price/free cash-flow? If the currency is going to
go to nothing, all those ratios are worth nothing." [Yeah, right, Brazil's currency going to zero with $65-70B in reserves. Ridiculous...]
Can you spell "emotional?"
Of course emotion is superceding all measure of fundamental valuation ............................ for now. As sure as Winter will be followed by Spring, the valuation will matter soon enough. How goes the parable that Buffet uses regarding "Mr. Market?" Something about its sometimes willing to buy at outrageously high prices and sometimes sell at outrageously low ones. This is an outrageously low price at 70ish.
There is an avalanche of noise right now to distract one from basic notions of business and market opportunity. I read that some "professional" lemmings today criticized the price paid by TEF for Telesp. I have to laugh at that. How do they expect, really, to be taken seriously? It is too easy and so superficial to say something like that now. Where were they on July 30, the day after the auction, or the week after?
The only caveats with TBR/TBH I see are what I call the "dead right" error and being tempted to buy more than one can economically swallow (margin).
The first issue refers to time. Anyone holding the September options long because they figured TBR was a fundamental value at 110 is going to be "dead" right at expiration next month. They were right, it was a value at 110, but.
Allow enough time for your vision to season and err on the conservative side with respect to the time element.
The second temptation is to "mortgage the house" to invest in TBR at this incredible price. The problem is that with such irrational pessimism (the ugly cousin of of exuberance), it seems we daily have witnessed the incredible being followed by the even more incredible. At this point I'd rather buy it 15 points from the ultimate bottom on its way back up than 15 points from the bottom on its way down. The corollary of the 2nd caveat is: Forget trying to find the bottom. Ten or even 15 points from the bottom will feel plenty good at 13-15X earnings.
I hope this isnt received as self-evident pontification. For some of the community here it may. If it is self-obvious to you, skip it. Its advice I can stand to hear for myself. |
