No. of Recommendations: 5
I find this “valuation” argument extremely short sighted. Again, I will use Zscaler simply because I know it’s numbers (not because of any other reason).

I might agree with you here, Tinker, but it would depend on what time frame "short sighted" means. Yes, of course, in the long run (several years) our companies will be a lot more valuable than they are today assuming that their business fundamentals continue to perform so well. And I assume that if one is invested in these companies, he/she currently believes that the companies becoming much more valuable in the long-run is the probable outcome. I am still mostly invested in SaaS stocks and will benefit when they recover.

I tend to care about the short term (in addition to the long term) because if I can convince myself that we might be near a bottom (valuation range...and I do think that Weiss's analysis has some flaws), I might be inclined to take some extra risk with some small amount of leverage. I am biased because over the past 2.5 years I have made a lot of extra money by making sequential short term/long term bets (sell near dated in the money puts to buy leap calls) that continued to work out as the short term targets were met and the short in-the money puts expired worthless. I took some losses recently but on balance I did extremely well with this approach over the past 30 months. Now, perhaps I got just lucky. This latest downturn in our SaaS stocks led me to close most of my leverage positions, realize most of my profits, and stop placing these sequential bets. I exited the options positions and ceased entering new ones mainly because the SaaS specific drop (with the overall market going up) didn't make sense or rather it didn't follow the pattern of the previous 2.5 years (it was also risk management to not keep/add leverage). What I mean is that in the past the SaaS stocks would drop primarily only when the market also dropped. My hypothesis is that SaaS valuations got too high in the near-term (which I agree would lead you to call short sighted if you are a long term investor).

I think some long historical data in stocks of the same category might give me some insight or perhaps this is just a fool's errand. But I like to know how much I am paying for something particularly when I intend to someday sell that thing to someone else. In the long run I don't care if we are near a bottom or not even if it might give me some additional peace of mind for now.

Chris
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