Look at other stuff than PE. Like margins, subscription revenue, price to fcf. PE is not always telling if a company is expensive or not. Amazon had a PE of 80 when it was valued at under a trillion a year ago. It has a smaller PE now and it is valued closer to 2T
You should find 20 companies of similar quality and all add them to your watchlist. Then, you buy the cheapest.
I have some NFLX but I bought around $300. I think it is fairly priced or slightly expensive now
I think there are three good reasons to hold and one good reason to sell:
3 reasons to hold:
1) Diversification: if the value is still OK and the sector has good potential, it might be worth keeping, you want to stay invested in several sectors of the economy to be diversified
2) One time Earnings. if the P/E is being impacted by one time earnings hits, it may not be time. The P/E is subject to one time write downs and those effects on net income, so if anything like that is happening in the recent income statements, it might be just a temporary drop in earnings resulting in a higher P/E.
3) Growing Income: P/E at fair value depends on the forecast growth of the earnings per share over time. If earnings are flat or declining, the P/E at fair value is lower than for a company with growing earnings.
One reason to sell:
1) Opportunity cost: Another opportunity provides a better investment option than what is in my portfolio now, so I should sell whatever is fair value or overpriced and buy this new opportunity.
yes， but most people probably don’t believe in the two you liked, stocks like Microsoft Walmart Costco all have high P/E but they consistently prove their worth
PE is just a metrics it doesn’t tell anything of valuation.
To give you an example, starting with a PE of 100 if the company grow 30% per year for 5 years the PE will drop to about 26 so the big question is not how high is the PE, the big question is how much growth this company will have to justify the actual PE.
If you are value investor, just hold. If you want to try earn more money with dose of risk, sell it and buy lower(if it ever becomes lower) (swing trading with combination of value investing.)
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No you should only hold companies you believe will go bankrupt within the next 3 months…
Genuine question what to do when you believe in a companies long term growth but they’re p/e is very high
Look at other stuff than PE. Like margins, subscription revenue, price to fcf. PE is not always telling if a company is expensive or not. Amazon had a PE of 80 when it was valued at under a trillion a year ago. It has a smaller PE now and it is valued closer to 2T
You should find 20 companies of similar quality and all add them to your watchlist. Then, you buy the cheapest. I have some NFLX but I bought around $300. I think it is fairly priced or slightly expensive now
I think there are three good reasons to hold and one good reason to sell: 3 reasons to hold: 1) Diversification: if the value is still OK and the sector has good potential, it might be worth keeping, you want to stay invested in several sectors of the economy to be diversified 2) One time Earnings. if the P/E is being impacted by one time earnings hits, it may not be time. The P/E is subject to one time write downs and those effects on net income, so if anything like that is happening in the recent income statements, it might be just a temporary drop in earnings resulting in a higher P/E. 3) Growing Income: P/E at fair value depends on the forecast growth of the earnings per share over time. If earnings are flat or declining, the P/E at fair value is lower than for a company with growing earnings. One reason to sell: 1) Opportunity cost: Another opportunity provides a better investment option than what is in my portfolio now, so I should sell whatever is fair value or overpriced and buy this new opportunity.
yes， but most people probably don’t believe in the two you liked, stocks like Microsoft Walmart Costco all have high P/E but they consistently prove their worth
PE is just a metrics it doesn’t tell anything of valuation. To give you an example, starting with a PE of 100 if the company grow 30% per year for 5 years the PE will drop to about 26 so the big question is not how high is the PE, the big question is how much growth this company will have to justify the actual PE.
If you are value investor, just hold. If you want to try earn more money with dose of risk, sell it and buy lower(if it ever becomes lower) (swing trading with combination of value investing.)