If you buy a business whose earnings are higher in the future, it’s likely the share price will be as well. Consider a simple example. You buy a 100 stock earning 10, ie an undemanding P/E of 10X. If its earnings grow at 12%pa, in ten years it will be earning almost 28. Providing the P/E’s unchanged, it will be trading at 280. If it is still trading at 100, the P/E would be just 3.6X, an unlikely scenario.
Q: Since Ben Graham isn’t around anymore, what money managers do you respect today? Is there a Ben Graham today? Wealth would create more Wealth You don’t need another Ben Graham. You don’t need another Moses. There were only Ten Commandments; we’re still waiting for the eleventh (j/k). His investing philosophy is still alive and […]
Earnings don’t move the overall market; it’s the Federal Reserve Board… focus on the central banks and focus on the movement of liquidity… most people in the market are looking for earnings and conventional measures. It’s liquidity that moves markets. Liquidity is the expansion and contraction of money, specifically credit. It’s the biggest variable that […]