Interesting write up, but IMHO a flawed conclusion. There are fundamental flaws in price centric investing with earnings multiples as your guiding light. Most people missed the meteoric rise of Amazon because they wrongly concluded that it had a PE of ~70x and was too expensive. Meanwhile a $10,000 investment in 2009 would be worth over $15 million today. For a break down, please see: https://rockandturner.substack.com/p/the-fallacy-of-price-centric-investing
Interesting write up, but IMHO a flawed conclusion. There are fundamental flaws in price centric investing with earnings multiples as your guiding light. Most people missed the meteoric rise of Amazon because they wrongly concluded that it had a PE of ~70x and was too expensive. Meanwhile a $10,000 investment in 2009 would be worth over $15 million today. For a break down, please see: https://rockandturner.substack.com/p/the-fallacy-of-price-centric-investing
I’m okay with missing big growth, that’s not what I’m looking for when investing.
It reminds me of a speech from Terry Smith where he shows that you could have bought L’Oréal at a PE of 280 and still made 7% per year.
What was the growth rate of Amazon at that time?
Growth is a key element of returns.
Take a look at this: https://rockandturner.substack.com/p/lessons-in-growth-stock-valuation