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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Paul Senior who wrote (55755)	7/28/2015 7:03:36 PM
From: Graham Osborn	Respond to of 78758

Well, I think we all agree the best Buffett businesses have nice gross margins. BABA's economics are closer to EBAY than AMZN (middleman rather than retailer). While that should improve the return on capital and reduce the operating leverage, it doesn't directly address the valuation problem. BABA reminds me a bit of FB in that both have 200B+ market caps, 50%+ growth rates, 60%+ gross margins, and 50+ PEs. Assuming no disruption, they'll probably fill out those multiples in a few years. But then you have stories like YHOO where the landscape changed and the moat vaporized. One thing I've learned from Buffett and Lynch is that new era businesses with huge markets and huge margins tend to attract huge competition. So, like Jurgis, I wait for the Glitch.