Value Investing Meets 1999, 2015

On January 10, 2000, Merrill Lynch’s Henry Blodget made the following statement: “Valuation is often not a helpful tool in determining when to sell hypergrowth stocks.” Shortly thereafter, the valuation of tech stocks trading on the NASDAQ exchange crumbled. On July 13, 2015, Paul Sweeney, an analyst at Bloomberg, offered this: “When you see stocks with these high multiples, it shows you the market’s comfort in the longer-term growth story.” Every generation, a rationalization for paying prices disconnected from business fundamentals seems to arrive. People can’t help themselves; it plays out over and over again.

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