During this interview with Chartered Investor, Aswath Damodaran explains how stock valuation has changed over decades. Here’s an excerpt from the interview:
Damodaran: Ben Graham actually listed 12 screens. It’s amazing how much of old-time value investing is stuck on those screens. So first let’s dispense with the notion that in the old days people used to be careful and invest, and now people are [unintelligible].
It’s just in the old days people used pricing metrics like PE ratios and then these days people use pricing metrics like price per user, price per subscriber. I’m not sure one is better than the other. They’re both pricing.
So first we’ve got to remove this aura of superiority that older investors have over younger investors that… this is part of growing old. You always think people are younger than you got things much easier than you did.
Work less hard than you did.
And I think the minute you adopt that attitude you stop being able to learn from what’s going on around you. So I don’t view my… I don’t view the market as being less sensible or more sensible, less value driven or more value driven, it’s just driven by different sets of metrics now than it was 20 or 30 or 40 years ago.
You can watch the entire discussion here:
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