Maybe it is just the market becoming more rational in terms of longer time prefenrence and appreciation of terminal value?! Something quality investors have long argued the market is not properly valuing.
These valuations are definetly high but not completely excessive or seem too speculative.
Maybe it is just the market becoming more rational in terms of longer time prefenrence and appreciation of terminal value?! Something quality investors have long argued the market is not properly valuing.
These valuations are definetly high but not completely excessive or seem too speculative.
Small pet peeve, thats not what the law of large numbers means: 'How much longer can they keep up that growth rate; don’t the law of large numbers start to drag it down eventually?'
Boom. This is correct. Many investors, like myself, want markets to be irrational but not too irrational. And this rally has been too rational. It has been fine for my returns as stocks moved to what I think is fair value, but now I see a dearth of new opportunities.
If Costco can produce low-vol/beta (inflation + 2%) growth for a long time, it should trade at 50x and produce 7% (assuming 3% inflation) returns.
As for LoLN, you are correct, but gotta let that one go. It has come to mean something completely different from its original meaning. I still can't get past "literally," which has somehow come to mean the opposite of literally, but I am working on it in therapy.
Maybe it is just the market becoming more rational in terms of longer time prefenrence and appreciation of terminal value?! Something quality investors have long argued the market is not properly valuing.
These valuations are definetly high but not completely excessive or seem too speculative.
Small pet peeve, thats not what the law of large numbers means: 'How much longer can they keep up that growth rate; don’t the law of large numbers start to drag it down eventually?'
Boom. This is correct. Many investors, like myself, want markets to be irrational but not too irrational. And this rally has been too rational. It has been fine for my returns as stocks moved to what I think is fair value, but now I see a dearth of new opportunities.
If Costco can produce low-vol/beta (inflation + 2%) growth for a long time, it should trade at 50x and produce 7% (assuming 3% inflation) returns.
As for LoLN, you are correct, but gotta let that one go. It has come to mean something completely different from its original meaning. I still can't get past "literally," which has somehow come to mean the opposite of literally, but I am working on it in therapy.
50x at 10% growth? I think we have different definitions of excessive.
Model it out in reverse, how long would the company have to grow at that rate to justify the valuation?
Only by comparing the imbedded assumptions with reality you can judge if it is excessive. 10% & 50x is incomplete information.
Modeling in reverse is the correct way to judge. That's exactly what Andrew did above and proved my point.