The Foregone Riches of Blue-Chip Value Investing

There are some people who look at The NASDAQ Index taking fifteen years to pass its 2000 highs and conclude that is some proof that the stock market is “rigged” or a “casino.” After all, if buying the largest technology names and holding them for fifteen years earns you 1% nominal returns (because of the dividends) and -2% actual returns (because of the inflation), then it seems to follow that a super-long period of no wealth-building would result in some skepticism about stock market participation in general.

This particular fear can easily be conquered if you come to appreciate that: (1) even dominant enterprises can become so overvalued that they will deliver disappointing returns even as profits continue to grow at a fast clip, and (2) a basic P/E ratio analysis will tip you off that something is unhinged about the valuation.

Out of the ten largest NASDAQ holdings in … Read the rest of this article!