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Here's what they teach about how fundamentals, valuation, and investing works. It's so engrained in some they have created all sorts of rationalizations when this consistently doesn't happen (others are stupid, the market is manipulated etc).
$SPX $SPY $INTC $MSFT $CSCO
$SPX $SPY $INTC $MSFT $CSCO
In practice however the relationship between profits, growth, sales, and a variety of other factors is much harder to tie to actual valuation. It's more akin to the following...
$CAT $GLD $GDX $DIA
$CAT $GLD $GDX $DIA
I spend a lot more of my fundamental time focusing on what factors drive businesses returns, and which of those are most affecting (correlated with) share prices. This is also a relatively challenging approach, which is why price action and behavior are so important.
$MSFT $CSCO
$MSFT $CSCO
Let's expand on this thread. I talk a lot about the 'volatility' of valuation. If you haven't seen the slide it's here. A good exercise is ask someone why they chose the multiple they did, and what is the all time high and low (range). This is how I knew $MU was 'clippable'. $SPX
Here's a slide I did as a thought experiment on $AAPL. Now, let's not throw everything out the window, there are good reasons why someone would choose a specific multiple (payback period, fed rates etc). That doesn't negate volatility and risk (see charts and risk management).
And the point of this today, $GE just hit an all-time low in the P/S multiple. This is not some 'rouge wave' but within the confines of the longer term volatility (see data). Many people have told me it was a value since 22 (some very smart people + large $'s), yet here we are.
Notes: Many people see these price moves and often say 'I can't believe it', or 'it can't go lower', or 'no one could see this coming'. This is nonsense. Valuation volatility is incredible and that's without discussing changing fundamentals (business volatility).
$GE $XLK
$GE $XLK
Can I go now
Yes fam yes
