Investors need to peel their eyes away from a stock’s numbers long enough to ask a very basic question: “Will this company or industry still exist in five years?” It happened in the case of pay phone operators, paging companies, and video rental chains — and it’s almost certainly happening right now in a number of companies and sectors.
Peaks are based on the belief that great wealth will be bestowed on the investors who believe in the presumed future, but watch out when brokers start pushing growth and then watch for changes in the market structure.
In a recently published paper, noted valuation authority Aswath Damodaran examines the discipline of growth investing and, in so doing, challenges the notion that growth investors are simply risk seekers who ignore valuation.
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