Being A Selective Investor In 2015

At Berkshire Hathaway’s annual meeting this past weekend, Warren Buffett mentioned that most stocks are likely a bit pricey right now unless interest rates remain low for the next 5+ years. You don’t have to consult the Oracle at Delphi to know that paying 28x earnings for Church & Dwight right now is going to lead to total returns lower than the company’s growth rate because Church & Dwight’s valuation tends to settle in the 18-22x earnings range during words of 5%, 6%, and 7% long-term U.S. bond rates. That story plays out across hundreds of stock across the nation.

That’s the bad news—we aren’t in 2010 or 2011 anymore where buying any large stock you’ve heard of before has probably led to great returns over the past four years. Instead, you have to zero in—pull out the magnifying glass!—and find those two or three dozen companies that either fall … Read the rest of this article!