12-16% Annual Returns From An Obvious Blue-Chip

The difficulty of investing right now is that most people know which businesses are growing fast and have bid up the valuations on these stocks to the 30-40x earnings range so it is difficult to determine whether the inevitable P/E compression will be more than offset by the high earnings per share growth rate.

Elsewhere, many of the stocks that are attractively valued on a P/E ratio basis tend to have very low growth right now, thus making it unclear whether they’ll outperform their loftier valued counterparts.

I suppose this is always the tug-of-war that exists, but it seems especially heightened right now for two reasons: (1) high-growth stocks that used to trade at 25x earnings now trade at 35x earnings, making it less obvious whether one should just “shut up and write the dang check” and (2) the businesses with slow growth right now can’t rely upon the excuse … Read the rest of this article!