Wall Street is fully cognizant of the great business model of CRM…That is why CRM gets such a premium valuation.
Market beating returns will not be found assuming the Street doesn’t understand the underlying finances of the company. Rather, what the Street does is underestimate the long-term competitive advantages of a company.
Tinker,
I’m very bullish on CRM and VEEV, and own both, and I don’t think you’re saying anything to the contrary, but your sentiment on…for lack of other words, underestimating the market, is well-taken.
We should never assume that the market is stupid. There is always a reason behind valuations, even when they aren’t immediately intuitive. It’s just that sometimes that reason may not apply to our thesis. Maybe it has to do with risks that we disagree with (LGIH). Maybe it has to do with recent one-time headwinds (CRM). Maybe there is pressure on retail, and even fast-growing businesses trade lower (SKX). As you point out well, a lot of times the valuation is simply based on the short term as opposed to the long term.
Thanks,
Bear