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Revler1082 (< 20)

Expensive is Relative

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March 07, 2011 – Comments (4) | RELATED TICKERS: OPEN , VMW , CRM

Every day I purchase a coffee at Starbucks for $2 and some change. And everyday I walk into work I am scolded by the "coffee club president" about the wastefulness of my ways.

To him, my $2 coffee is a disgusting display of my over the top opulence; my golden Ferrari one could say. However, to me, it's a solid investment (one of my best, damn you Mr. Market). Not only is my bourgeois palette not suited for the roach coach coffee of the peasantry, but it helps me start the day, and I enjoy my experience while purchasing. 

I think if that if Mr. Coffee Club President was an investor, he would have his screener preset to stocks making new 52 week lows. And he would quickly discover that the weather forecast for his part of stock-town was a 99% chance of falling knives. I was fortunate enough to learn early on that a low price does not a value make.

I don't mind paying a premium for a company that I think deserves it. I've bought some stocks near their 52 week highs. Some worked out, some didn't, but I always tried to validate my decisions by making sure that the valuation for the company hadn't gone off the charts.

On the other side of course, are stocks like OPEN, VMW, et al. Who are the brave souls that set their screeners to stocks reaching new 52 week highs and PEs shooting for the stars?

And so this is my question? Is there value in these stocks that I am missing because I have become Mr. Coffee Club President? Are these stocks "expensive" only to me, or have they just overshot in general?

4 Comments – Post Your Own

#1) On March 07, 2011 at 11:20 AM, chk999 (99.98) wrote:

Stuff looks pretty expensive to me right now. (Which has nothing to do with whether the general market will continue to go up or not.) I looked at a lot of companies yesterday and only found two that seemed to be fairly priced and no bargains. Unless I see something on really amazing sale and I know why it is on amazing sale, I don't plan on buying.

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#2) On March 07, 2011 at 11:35 AM, Revler1082 (< 20) wrote:

I agree, it's become quite difficult to justify a purchase at these levels. Every morning I wake up and the futures are in the green even if they were down 100 the night before. Something just doesn't "feel" right. Some sort of pullback would make me feel much better about the overall health of the market.

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#3) On March 07, 2011 at 11:46 AM, caterpillar10 wrote:

i tend to pick from both sides of the spectrum - i like things that have been badly beaten to death for what i believe to be spurious or temporal reasons but i also follow 52+week highs (especially multiple or serial offenders) as well as historical highs. in short - sometimes it is happening for the right reasons. occasionally both screens reveal the same company; those get immediate attention.

these are just clues - either way, aqusition simply for one or the other or both conditions is a very bad idea - where the real work begins.   

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#4) On March 12, 2011 at 7:46 PM, buffalonate (96.77) wrote:

These stocks will crash and burn soon along with Salesforce, JDSU, Acme Packet, Riverbed, and several others.  Stupid money doesn't know how to value a stock.  They hear a rumor and come running.  I am going to be shorting a slew of tech stocks in a couple of days.  Opportunities to make easy money like this don't come around often. 

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