THE PE RATIO DOESN’T MATTER, BUT WILL KILL YOU!

Numerous state the does not actually matter when it pertains to investing which is proper in a way. However, forgeting the long term cycles can give nasty surprises that you do not wish to go through in you life investing cycle.

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0:00 Ratios.
1:15 Ratio Cycle.
6:59 Investing.

THE PE RATIO DOESN'T MATTER, BUT WILL KILL YOU!

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44 Comments

  1. I have been following your videos for a long time and this has been the best video, rational and informative. Thanks!

  2. Yeah seven but we’re in a new market now. Ai is going to be everywhere in about 10 years. There will be Optimus Tesla robots, chat gpt 500, automated college professors, flying toilet bowls, etc

    1. In 5 years we won’t need toilets. AI robots will put your poo on AI Tesla rockets and launch it into space. lol

  3. Highly rated shares point to rosy expectations of high rate of growth, but if that growth doesn’t grow as fast as the market expects, their multiples will get de-rated and at the same time the share price will get a second hit on a reduced EPS. I quite like situations where a share is lowly rated where there is scope for multiple re-rating if its earnings can grow faster than expected and when I am wrong the downside is limited. The bottom line, successful investing involves getting two right: 1) pay the right price and 2) get the future prospects right.

  4. Great video. But this time it’s different though. This time it will last forever πŸ˜›

  5. Hi Dr Carlin,

    Two tickers for you, AMDOCS (DOX) – IT Consulting firm. DOX is trading at P/E 12 only seen briefly during COVID. Alamo Group (ALG) – Agricultural and Farm Machinery. ALG at 15 P/E, seen in several ocasions during the years but the company has been given a premium due to its consistency and low debt. Obviously any drawback is somewhat justified. Would love for you to evaluate either/or. Thanks for sharing your knowledge with us.

    Best!

  6. Yeah if you look at only Schiller PE ratio the current level predicts 3.5% per annum with a 1.5% standard deviation over the next 15 years. πŸ˜”

  7. The worst investments I have ever made were in high PE ratio companies, luckily, I have managed to get out from one by now, without loss, and I’m working on the other 2 ones.
    These are the situations when you learn the most, before this, I didn’t know what opportunity cost meant.

  8. You are right but partly… if you remove the “magnificent seven” the PE of the 493 other companies is about 16..
    The SP 500 current PE doesn’t reflect the true valuation of the market

    1. are you sure it is 16? every company i check is usually 25.

      there might be a lot of big companies with low 2-3 pe dragging the others down from 25-80 pe.

  9. P/E doesn’t matter until growth stagnates then: ☠☠. Bought TSMC at $62, sold this week at $181, could it double from here? Sure, but I don’t have enough balls to hold for that.

  10. Thanks Sven – U R the hardest working sensible person teaching at the moment. Impressive output. We appreciate it

  11. We should be adding long term us bonds as a hedge.
    Potentially also low correlation stocks with the overall market that make money on the back of volatility such as flow traders and virtu financials.

  12. We don’t know what will precipitate the reversion but human nature hasn’t changed . Lots of giddy people all in. I retire next year and I’ve been selling everything that isn’t nailed down .

  13. Hey Sven, thanks for the great content always! But it seems that Youtube only talks about what to buy and not to buy never about how to structure your portfolio, how much to allocate for each stock, sector and cash. When to buy, sell, cut losses or take profits. As a beginner Value investor I would like to learn more about these fundamentals.

  14. Why do some people say that PE does not matter if the very point of value investing is buy something at a lower price compared to its true price..

    They will get into nasty troubles πŸ˜…

  15. If I placed a bet now, it would be on: once the cycle reverts, people will look for highly undervalued Chinese stocks to invest (and others as well). Not a financial advisor, just a thought.

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