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    Pace of growth continues as of Aug. 20, 2020.

    On July 18, 2020, Jeff discussed prospects for Alphabet and Facebook:

    Alphabet (GOOG) and Facebook (FB) as value stocks? Really? They meet Bill Nygren’s definition. (The Acquirer’s Multiple).

    Many strategists now claim that “value looks cheap compared to growth.” Though I understand what they mean, and even agree with it, the phrase bothers me. To them, “value” is a euphemism for inferior businesses. But “value” and “growth” aren’t opposites.

    When we say we are value investors, it doesn’t mean that we limit our investments to below-average businesses. It simply means that we estimate what each business is worth based on its own unique fundamentals and buy only those that are priced well below that estimate.

    It’s just logical that the value we ascribe to rapid growth businesses is more than we ascribe to slow growth—or declining—businesses. Using our definition of “value,” rapidly growing companies, like Alphabet and Facebook, are “cheap” today, despite having trailing P/E ratios that are higher than the average stock. And slower growth companies, like banks such as Citigroup and Capital One with trailing P/E ratios that are a small fraction of the average stock, also look cheap.

    Jeff returned to the topic of big tech on August 13, 2020, in discussing Microsoft:

    Microsoft (MSFT) may reach a new audience if it can acquire TikTok. Harvard Law School distinguished fellow Vivek Wadhwa sees a payoff far beyond the numbers.
    This is an interesting choice which does not fit well in the Matrix. The argument provides support for continuing growth. To me, this stock could be part of a long-term core growth holding if you accept the high valuation. This is the kind of move that might justify it. I place it in group B2.

    • This topic was modified 1 year, 8 months ago by Moderator.
    • This topic was modified 1 year, 8 months ago by Moderator.
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