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Value Investing: Tools and Techniques for Intelligent Investment by James Montier

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Chapter 33. Revulsion and Valuation[33]

  • The hallmark of revulsion is unambiguously cheap asset prices. The speed of the market's unravelling means that we are rapidly approaching the levels of valuation that are normally associated with revulsion. For instance, the UK and European markets are trading on 10× Graham and Dodd PEs (current price over 10-year moving average earnings).

  • Of course, valuation isn't a binding constraint in the short term. Cheap stocks can always get cheaper, and more expensive stocks can always get more expensive. However, for long-term investors these are compelling valuations indeed.

  • In the past I was often told that my favoured valuation measures were anachronistic, that they failed to capture growth, and were at best simplistic and at worst stupid. However, in recent weeks, investors have started to raise a different question. Rather than ...

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