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CptAwesome

831 Posts.

26

14/11/16

15:56

Post #: 20604686
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Originally posted by persistentone ↑

Businesses with defensible moats around them generally never sell for much less than a forward PE equal to the growth rate. You pay a high price to get in, but if you can sit on your hands for 10 years you get a lot of growth compounded without tax.

Businesses with flimsy business models usually sell at dirt cheap prices. And this is because eventually they get in trouble and wipe out a substantial part of equity.

You can't use the high valuation of a business with a sustainable competitive advantage in direct comparison to the low valuation of a business that has no competitive advantage. Cheap isn't cheap when you have such a large chance of permanent impairment to capital over the next five years.

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So like I said, what stock fit that model atm? I sold REA and ALU near their highs because people were 'paying up' for these growth stocks and I am sure plenty of them are selling because the line on the screen is going down.

RWH Price at posting: $1.29 Sentiment: Hold Disclosure: Not Held
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