Momentum vs Business Valuation
"The momentum guys take it up to the moon,
the value guys pick it up off the floor.
Just watch out for the space between the two."
-Confucius the trader
have been reading up on the Turtle Traders and their momentum strategy. They would have bought anything as long as it meets their break out rules. Fascinating statistical strategy based on both 20 period price action and 55 day price action. Im sure they love the action in NVDA right now.
However, in the valuation books. The oldies but goodies books (Intelligent Investor by Benjamin Graham, Beating the Street by Peter Lynch) they would be less enthusiastic about the current valuation. Most useful would be Peter Lynchs PEG ratio, where growth rate is used to allow paying a higher price than normal for growth stocks.
The roughly 30% growth rate annual expectation in this case would mean if NVDA falls below 30pe, it would be attractive. Its almost twice that now. Thats not necessarily a reason to sell a quality stock. it just means that investors have already market up the stock and are buying it ahead of the future growth being expected. In this case, 2026s future growth.
Traders gonna trade. They dont care about the future value of a stock. they care about Profit this week or this month and then on to the next one.
however the investors do care. They are looking for getting a deal on something that can swell up with earnings and juicy future value dividends. Investors want a discounted price today, and 20 years of accumulated earnings so they can milk the future dividend payouts.
Any who, just watch out and be aware. Its a fast horse, its also a popular one.
the value guys pick it up off the floor.
Just watch out for the space between the two."
-Confucius the trader
have been reading up on the Turtle Traders and their momentum strategy. They would have bought anything as long as it meets their break out rules. Fascinating statistical strategy based on both 20 period price action and 55 day price action. Im sure they love the action in NVDA right now.
However, in the valuation books. The oldies but goodies books (Intelligent Investor by Benjamin Graham, Beating the Street by Peter Lynch) they would be less enthusiastic about the current valuation. Most useful would be Peter Lynchs PEG ratio, where growth rate is used to allow paying a higher price than normal for growth stocks.
The roughly 30% growth rate annual expectation in this case would mean if NVDA falls below 30pe, it would be attractive. Its almost twice that now. Thats not necessarily a reason to sell a quality stock. it just means that investors have already market up the stock and are buying it ahead of the future growth being expected. In this case, 2026s future growth.
Traders gonna trade. They dont care about the future value of a stock. they care about Profit this week or this month and then on to the next one.
however the investors do care. They are looking for getting a deal on something that can swell up with earnings and juicy future value dividends. Investors want a discounted price today, and 20 years of accumulated earnings so they can milk the future dividend payouts.
Any who, just watch out and be aware. Its a fast horse, its also a popular one.
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