The Investment Thread

Saint_Ward said

I'm no t sure the classic PE ratio is as useful for the S&P500, unless it's been the last few years. PE ratios haven't really explained tech, and their growth compounding is insane. Tech makes up like 8 of the top 12 stocks (2 are Alphabet).

AMZN is getting beat down a bit, and is looking more attractive.

The airlines are getting hammered and they had good news. I think people are freaking out and just pulling their money. It will make a good time to buy a few premium companies.

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I fundamentally disagree with the notion that PE rations mean less for tech stocks. Yes, you have to take into account their growth potential, but at the end of the day, a company's value is driven by their profit margins and ability to grow those margins.

So, while a PE ratio of 15 might be low for a tech stock, one with a PE ratio of 60 is probably way out of whack. It assumes exponential growth for many years, which is unrealistic given that major economic shocks tend to happen every 7-10 years.