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

To: Triffin who wrote (423)	10/16/1998 8:30:00 PM
From: Tomato	Read Replies (2) \| Respond to of 4691

Can someone out there help me with understanding the relationship between ROE and P/E? I know from the Buffettology book that Warren likes high ROE stocks. Having said that, what about high ROE stocks that are trading at huge p/e multiples in relationship to their growth rate, e.g. Coke? Isn't Coke a bad buy? And does a historically high ROE like Coke's insure the ROE will continue to be high? (sounds like a rhetorical question) Maybe someone could use Coke as an example to expound on this topic? Seems to me the p/e of Coke is going to recede toward the mean and not stay in the 40s, in which case the price of KO should go much lower. But I don't know, so hence the question(s).