No. of Recommendations: 21

A little over a couple months ago, I posted on the potential predictive value of P/S in high tech investing wherein often these stocks do not have earnings and therefore don't allow commonly utilized valuation methodology:

In that post and a couple others, I presented data that supported the contention that higher P/S would likely yield lower returns. Many here including Saul were unimpressed by the data or paid little to no attention to P/S.

As an update, here are the portfolio 2 month returns:

P/S < 10 24.7%
P/S >10<14 25.9%
P/S > 14 11.9%

Clearly within each portfolio, there were greater winners and it really was a great period for all portfolios regardless.....but the lower P/S portfolios had double the returns of the highest. Keep in mind, these portfolios were during an insane bull market so there could be a different outcome in a bear market but one might surmise the differences would be as pronounced as higher valued assets are pressured in sell-offs.

Again there are few absolutes in investing, but I would argue (have argued) that while the old mantra of "better performing stocks are always expensive" may be has its limits and probabilities......there is a price that is too high to pay for any growth stock.

I hope you can also appreciate that despite one's self assessment of investment successes this past few months, a mindless portfolio as detailed above did pretty darn well, even one completely throwing valuation caution to the wind. So it would be reasonable to check one's emotions at the door and be cognizant that one's own selections and prowess can be little more than random market movements and momentum in sectors or industries.

Sorry to intrude.

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