Thread by @contrarianEPS

many foolish hypotheses are coming out to justify v high valuation for quality.

only sensible i have found till now is low interest rate.

Quality can retain high roe just like a bond. so that this bond gets priced higher vs govt bond. but even then i find excesses..

that also depends on ability to predict govt bond rate over long period. buffett had said that if you tell him that govt bond can stay at low interest rate for 30y, even index fund is a bargain at 25x.

those who are invested already to chase performance want to justify how quality can enjoy v high valuation. ask them to check past, none of them traded more than 30-40x pe for sustained period even during growth period of 20s cagr. current growth is sub 12-13

same guys once justified pharma at 30 pe calling it “defensive” assuming 20% growth was permanent. medicine don’t go out of demand, what not.
frankly its all boils down to performance chasing which is fair enough, but don’t blind yourself with random fundamental logic.

momentum purist actually capture these performance chasing rallies of herd v well. they get also get out right, they don’t have baggage or rationalising mind

if probed further one exception hdfc bank will come to the fore in a mkt of atleast 700 traded stocks

yes if high growth continues, stock may remain expensive, hdfc bk has grown 25%+ for all quarters. V rare. no quality cos has done that to remain expensive for sustained period

another hypothesis was market isn’t a fool to value them so it must be true. so you mean to say that market was a fool to not value them so high 15-20y preceding last 7y despite growth ?