$200 Party, page-341

"Correlation isn't causation" forms an early part of any respectable statistics course.

Because, just like,

"Cats have tails. Dogs have tails. Therefore cats are dogs"

is a compositional fallacy, so too is:

"Ethical stocks are hitting new highs today because they are ethical".


Like you, and I'll wager that like just about everyone who has been invested in publicly-listed securities in recent times, the majority of the stocks in my portfolio which I have held for some period of time are at record highs.

And among that grouping that are at record highs are ones that I'm not sure would necessarily qualify as "ethical" investments (whatever the requirements are to have that descriptor applied), including companies involved in the activities of:

- distribution of plumbing supplies
- designing and manufacturing of (expensive!) kitchen appliances
- designing and manufacturing accessories for SUV's and 4-wheel drives
- insurance broking services
- distribution of car and truck tyres
- supplying of spare parts for the trucking and bus sectors
- distribution of spare parts for passenger internal combustion engines
- commercial and retail banking
- financial advisory business
- investment banking services
- provision of accounting practices
- supplier of services to the mining industry (including coal and oil & gas)
- IT products distribution
- diversified retail conglomerate
- EFTPOS payments terminals
- an assortment of IT-related/SaaS companies

(Some of these stocks I am busy selling - consistent with when I sold my CSL shares some 15 months ago in order to fund the purchase other stocks which I assessed to be inordinately cheaper than the overvalued CSL at the time.)


So it's not just the... er... "ethical" stocks that you happen to own which are roaring... its happening across a great many pockets of the market.

(I'm no macroeconomic asset class specialist, but my sense is that this is driven by very cheap capital - a LOT of it! - sloshing around the globe in recent times. And should that excess liquidity be removed at some point, for whatever reason, then well, beware stocks trading at 30, 40 and 45 times P/E... "ethical" ones or otherwise.)



As for AEF, in particular, if you think that the market bidding up a stock to a level of a P/E multiple of 100 times is something to be held up as somehow representing a remotely economically rational outcome, then feel free to dine out with that sort of thinking.

Me, I far prefer to remain grounded in a fundamental valuation framework.
I respect my family's capital too much to not do so.

On that score, interestingly enough, CSL - following its chronic under-performance over the past 15 months (55% under-performance versus the overall market, 75% under-performance against the major banks and more than that compared to other growth stocks) - now finally looks better valued.

Not necessarily on an absolute fundamental valuation basis, I don't believe, but relative to other growth stocks.

.