I have some general/investment philosophy questions for those who frequent this board. But first, I want to give a little background on myself, so you can understand what I’ve been exposed to from an investing philosophy and why I’m asking these questions.
I’m in my 30s and have steady income. I started using Stock Advisor in the summer of 2020, like many did, and I simply bought each recommendation without thinking much of it. I had also been spending a lot of time listening to David Gardner’s Rule Breakers Podcast. The basic stock advisor picks were working fine until early 2021 when many of these growth stocks started to sell-off. This is when I found Saul’s board. After reading those posts for a month or so, I decided to jump into that style in May of 2021. Generally, it worked extremely well for 2021, even after another growth stock sell-off at the end of the year, I was up much more than I thought I would be.
All throughout 2021 I had seen posts about valuation, occasionally on Saul’s board, but obviously more often on the individual company boards. I’m planning to do more research on how best to understand valuation, and perhaps this board has some advice on websites or books to check out.
But I guess my main questions have to do with often you are buying stocks if you are concerned with valuation and if that really limits what type of stocks you own. For instance:
Have valuations been too high for you to buy stocks for several years? I’ve heard some people say valuations need to come down to like 2016 or 2018 levels. Does that imply they haven’t bought anything for the past 4 to 6 years?
Most of the Stock Advisor/Rule Breaker stocks are at elevated levels and seem to have been at these levels for a very long time. Does this imply that you essentially don’t buy certain types of stocks because they rarely, if ever, trade at a low enough valuation? I understand the logic in that, but it seems like that would eliminate pretty much all tech stocks.
I’m trying to get my head around this type of investing philosophy because the two main people I have learned from disregard valuation (to varying degrees), and have been VERY successful. On one hand you have Saul, who is meticulous about the financial reports and doing research on his companies, while ignoring valuation. On the other hand, you have David Gardner, who seems to mostly use a framework that focuses on the company itself. He doesn’t seem to talk much about financial reports, at least on the podcast, and I don’t hear him talk about valuations much. In fact, one of his go-to sayings is “dips wait to buy the dip”.
So anyway, thanks for reading, and I appreciate any insight you care to provide.