Jump to content

Valuations Do Not Matter - Ken Fisher


NBL0303
 Share

Recommended Posts

Article seems to define "valuations" as trailing twelve month and next twelve month P/Es. I have yet to see anyone actually argue that, so it's clearly a straw man.

 

Ken Fisher has to know this, since his father many, many years ago wrote the definitive book on growth investing. So even many decades ago, knowledge investors were not just looking twelve months forward and twelve months back.

Link to comment
Share on other sites

Aside from the question of, "what is the right valuation metric":

 

If you assume a business is only worth the sum of its cash flows at a properly discounted rate, then valuation is all that matters. You invest, you get the cash flows over time, and if there is value then those CFs are higher than your investment.

 

But I wonder - is this definition of "what a business is worth" too limited?

 

For example, a business issues financial securities. Those securities are bought, traded, sold, shorted, borrowed against, derived against etc. etc. An entire chunk of the economy has been created to allocate these securities. Is that not valuable? And if so, to whom should that value be assigned?

Link to comment
Share on other sites

Well, we can start by looking at all the folks who have been sitting on huge hoards of cash and crying about valuations for a damn near eternity and compare that to the people who just regularly invest....

 

 

or we can get a little more granular and realize that valuation only matters IF you have an expected rate of return requirement AND your metrics are right. Just because YOU do not agree with the valuation metric YOU choose to evaluate a company on, doesnt mean that EVERYONE ELSE, is wrong. Being flexible and openminded is probably the best approach.

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share

×
×
  • Create New...