Originally posted by rajnsharma
Originally posted by prabhakarkudva
Its a mental rut i feel.Some people just can't get over the high PE hangup.The point that most ppl miss is that if you have a 40 PE stock going to 20 PE you lose the same money as a 10 PE stock going to 5 PE and the probability of both the scenarios is the same in most cases.Also eventually both can go to 0 and probability of that happening is also same in both the situations.
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On the other hand 20 PE stock can go to 40 PE but 40 may not go to 80 
It's the way you look isn't it. |
Consider, possibilty of fall is equivalent. A 40 PE stock can fall to 10 PE the very next month and a 10 PE stock falls to 2.5 PE. Bear market grips for next 6 months... both companies are strong, debt free, and show profits in bear market and 25% growth in topline and bottomline, and its likely to continue for next few years....
One at 2.5 PE becomes a no brainer IMO.
Another fact is, there is a long historic list of stocks going from 5 PE to 20 PE simply because they broke 1000 crore revenue barrier, but not a long list of stocks going from 20 PE to 80 PE.
Buy and hold isn't actually as sure shot investing as its made out to be, India is in transformation phase so every one is winning and investing is a cinch on BSE
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