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Price targets for growth stocks are meaningless in this day and age.
I believe the table is set in an unprecedented way.
The “PE” ratio on the 10 year treasury is 114x (at .88% yield)
That’s 114 years to earn back principle...
Thread contd... https://twitter.com/timmerfidelity/status/1301872403904114691
I believe the table is set in an unprecedented way.
The “PE” ratio on the 10 year treasury is 114x (at .88% yield)
That’s 114 years to earn back principle...
Thread contd... https://twitter.com/timmerfidelity/status/1301872403904114691
There is no sense in comparing current multiples on the market to historical ones.
Not even the most conservative money mangers in the universe would accept the RF rate (.88%) let alone pensions that require a return around ~ 5-7%.
Not even the most conservative money mangers in the universe would accept the RF rate (.88%) let alone pensions that require a return around ~ 5-7%.
Looking through this lense, stocks are “historically” cheap, even growth stocks trading at “historically high” multiples.
The S&P trades at ~ 30x earnings, which means if earnings stayed constant, it would take 30 years to make back your investment.
For comparison, in 2000 it was ~6% which would be equivalent to a 16.5x PE or 16.5 year Payback window.
In 2008 the 10 year yielded ~3.75% equating to roughly 27 year “payback”.
In that context, stocks trading at current levels (30x earnings or payback) may seem “pricey”.
In 2008 the 10 year yielded ~3.75% equating to roughly 27 year “payback”.
In that context, stocks trading at current levels (30x earnings or payback) may seem “pricey”.
Additionally, you have more investment capital and funds out there than ever before 
And the universe of investable public companies has been shrinking in the U.S.
*About 3,600 firms were listed on U.S. stock exchanges at the end of 2017, down more than half from 1997*
And the universe of investable public companies has been shrinking in the U.S.
*About 3,600 firms were listed on U.S. stock exchanges at the end of 2017, down more than half from 1997*
Demand 
Supply
Prices =
Supply
Prices =
Insights drawn
Supply/demand economics are in equity investors favor
Every single investment is tied to the “risk free” interest rate, usually gauged by a US treasury bond.
This disconnect from RF rate to the PE on the market is a more telling story than historical multiples
Supply/demand economics are in equity investors favor
Every single investment is tied to the “risk free” interest rate, usually gauged by a US treasury bond.
This disconnect from RF rate to the PE on the market is a more telling story than historical multiples
To be clear:
Many growth stocks will get crushed with a failure to meet or exceed expectations and come down to “value territory”.
***Pick a story that you can truly get behind,
so when volatility strikes,
you stay strong and analyze the metrics / not the stock price.
Many growth stocks will get crushed with a failure to meet or exceed expectations and come down to “value territory”.
***Pick a story that you can truly get behind,
so when volatility strikes,
you stay strong and analyze the metrics / not the stock price.
There are no free lunches, including a never ending, rising market.
1) rates could go up making equities less appealing 2)companies can earn less in the future if a recession hits or with higher taxes or anti trust rules becoming stronger 3)other crises
1) rates could go up making equities less appealing 2)companies can earn less in the future if a recession hits or with higher taxes or anti trust rules becoming stronger 3)other crises
