“No more over-valued stocks for us. We learned our lesson. Fooled us once, can’t fool us again.”
Saul,
What history do we have on making good returns over 12-24-36 months, when the starting point of the stock price is/was a 40 P/S or higher?
The 2017 and 2018 successes were off much lower P/S than what ZM, CRWD, DDOG received out of the gate.
ESTC and ZS both IPOd at “rich” valuations, and are lower in P/S today, yet not all that much higher in price than their IPO for the amount of time that has passed (about 18 months for ZS, 12 months for ESTC).
In 2018, SHOP was the outlier with a 24 P/S at one point, I recall.
In March-August of this year, a 24 P/S was handed out like candy.
Now we appear to have settled back down to just simply high P/S levels for growth stocks, vs extremely high. AYX, TTD, ESTC, MDB, ZS…all still over 15, which is vastly more expensive than value stocks, which means the market is rewarding their growth rate with multiple expansion.
Jan was largely a rebound from Dec drops. Feb thru July 26th in 2019 was a momentum play, imo.
I have no doubt many here can make good gains on ZM, CRWD, and DDOG in the short-term.
Don’t see how anyone can expect a quadruple, as you brought up, anytime in the next few years, as it would be market cap territory that is not common for sub-$1b or sub-$2b revenue runrate companies.
In today’s constantly changing/evolving/disruptive landscape, to imagine holding a $12/15/20b mkt cap for 3-4-5 years, when their P/S is currently over 40, seems like a setup for a fairly low CAGR in years 3-4-5, as you are getting multiple years priced in TODAY.
I get it…no one is supposed to argue with Saul, due to his track record…but here is the thing no one seems to grasp: there is no track record on $10b+ mkt cap companies with P/S over 40. From what I can tell, Saul made great CAGR for decades and P/E was a factor. I understand the “why” behind the switch to cloud/saas focus. In 2018, there was little care about profitability. Now, all of a sudden, we like to say there is. So what changes in 6-12-18 months from now?
That smacks of momentum investing, with no reasonable expectation that a stock like DDOG will be held for 4 years, while sustaining a legacy-Saul-average CAGR of 25%+/year. And there is nothing wrong with momentum investing, but I have seen it stated by most on this board that they don’t believe they are momentum investing.
So, again: I am unaware that there is any established track record on $10b+ mkt cap companies with P/S over 40.
If there is, please let me know…I will be happy to be wrong.
Otherwise, you are declaring a truly new paradigm, and that “this time it’s different”.
Dreamer