By Steve Reitmeister
Why do I say this is a beneficial “house cleaning”?
Because a lot of the gains the past couple years accrued to unworthy stocks. For example, Tesla may be the best car company in the world. But they are still a car company and that usually comes with a PE of 10…not 133 which is what it was at its peak.
Even now after a hearty haircut TSLA still trades for 90X next years earnings. It will never make it down to 10X like GM and Ford…but perhaps 30-40X is more realistic.
Same goes for all the BS Meme stocks like GameStop and AMC. They too are coming down to earth.
And the list goes on with a whole host of other over inflated stocks in tech, biotech, EV, cannabis, and all other areas that fuel our imaginations…but are trading at valuations that would make Benjamin Graham roll over in his grave (Benjamin Graham is considered the Father of Value Investing and the famed mentor of Warren Buffett).
The bummer is that this house cleaning is not only affecting these names. Rather it is tossing out all the babies with the bathwater in a classic value reset.
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