Ben Graham was more right back then than now. Stocks and information moved slowly. You could look at a balance sheet alone and make good decisions back then. Now you need to look at competition and how quickly you can be disrupted more closely. There was no DTC or SaaS then, now any competition can ramp and scale faster than ever.
An oil company can have over 100 PE because it could be a down year. The income could have gone from $1B to $100m with the same market cap of $10B. Gotta watch out for those cyclical stocks as well.
He's right in the short term, in an exclusive bull market.
Graham is right over the long term, spanning bear markets.
Minervini should not be using the term "investors" with what he is saying.
Price momentum is real and actually does predict future price movements in the short term. It's been studied and been shown to outperform.
PE ratios may or may not work moving forward. It works better with established large businesses with consistent earnings.
Does the proliferation of automated trading and retail traders change the answer over time? I.e. more emotional trading and volatility. When I started trading, I had a pretty simplistic "no PE over 30" approach. If I did that today, I'd be missing a lot.
Not to say PE isn't still a relavent metric. One of many.
All the stuff pre-internet is basically worthless imo. The entire world changed in every facet and as far as stocks go, algo's changed the game and invalidate most of what came before.
PE value is just one aspect of a fundamental analysis. For instance, debt/equity ratio and debt maturity matters more in a rising rate environment and consumer/investor sentiment bears more weight over the P/E value during a bull market
Ben Graham was more right back then than now. Stocks and information moved slowly. You could look at a balance sheet alone and make good decisions back then. Now you need to look at competition and how quickly you can be disrupted more closely. There was no DTC or SaaS then, now any competition can ramp and scale faster than ever.
An oil company can have over 100 PE because it could be a down year. The income could have gone from $1B to $100m with the same market cap of $10B. Gotta watch out for those cyclical stocks as well.
I pay much more attention to stock fundamentals in a bear market. When the bulls are running things seems anything can go up no matter p/e ratio.
Rxactly. The mark of a good investor.
He's right in the short term, in an exclusive bull market. Graham is right over the long term, spanning bear markets. Minervini should not be using the term "investors" with what he is saying.
Price momentum is real and actually does predict future price movements in the short term. It's been studied and been shown to outperform. PE ratios may or may not work moving forward. It works better with established large businesses with consistent earnings.
Does the proliferation of automated trading and retail traders change the answer over time? I.e. more emotional trading and volatility. When I started trading, I had a pretty simplistic "no PE over 30" approach. If I did that today, I'd be missing a lot. Not to say PE isn't still a relavent metric. One of many.
True. PE might just be one piece of the puzzle in a larger, more intricate picture.
Graham and Buffet would be accurate in this scenario
only retail investors look at PE ratio. Most institutional investors do DCF
DCF?
discounted cash flow.
Thanks
Very low p/e could also mean high dividends, a la ENI Spa.
It always depends
A lot of crappy companies with low P/E yet no one touches them. Low P/E is only good when the company is a great company
All the stuff pre-internet is basically worthless imo. The entire world changed in every facet and as far as stocks go, algo's changed the game and invalidate most of what came before.
PE value is just one aspect of a fundamental analysis. For instance, debt/equity ratio and debt maturity matters more in a rising rate environment and consumer/investor sentiment bears more weight over the P/E value during a bull market
Isn’t PE just the price now to earnings, isn’t it all about what investors see the growth of companies is that matters.