Here’s a recent article from the Globe and Mail titled – Fairfax CEO Prem Watsa touts traditional value investing amid frenzy for tech stocks like Shopify, in which Prem Watsa says that today’s valuations for some wonderful companies are ‘insane’. He adds that the best days are ahead for value investors. Here’s some excerpts from the article:
“These are all wonderful companies, but their valuations are insane,” added Mr. Watsa in an interview last week, as he described his speech to staff earlier in the month. “As in the past, this will end – and it will not be pretty.”
“For value investors, this has been a tough decade,” Mr. Watsa said. “I tell people, value investing has worked over a 100 years, you just have to be patient.”
A student of markets, Mr. Watsa pointed out to his team this month that valuations on the so-called FAANG stocks – Facebook Inc., Amazon.com Inc., Apple Inc., Netflix Inc. and Google, now known as Alphabet Inc. – echo the lofty earnings multiples seen on the Nifty-Fifty growth stocks of the 1960s, or on Cisco Systems Inc. and Microsoft Corp. in the dot.com boom of the 1990s.
When these companies fall out of favour, and the stock price falls, it can take years for the stock to recover, even when the underlying business does well. In contrast, Mr. Watsa said: “The best days for value investors are ahead of them.”
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