[GregWeld]

Here's why - IMHO - "P/E" ratios don't matter....

I don't invest in "growth" companies. I simply can't afford the acid stomach that comes with them - and being retired - don't want to be in a situation where the MARKET turns south for a couple years and I have money tied up in stocks with red (underwater investments) that don't pay me to own them. Having said that - you younger guys should be adding GROWTH to your portfolios. You can afford to wait for the market to turn higher after a downturn - you're NOT retired - and you're still earning a living to support yourselves.

I've missed out on a couple doozies this last couple years. Namely FaceBook (FB) and NetFlix (NFLX). The ONE YEAR chart shows FB with 85% growth and NFLX has 73%. Those are big numbers.

Here's the point.

Some folks get all hung up on certain metric such as P/E (Price to Earnings) ratios. And here are two prime examples (as that's all they are!) with huge P/E's - where the P/E just simply doesn't matter. Why? Because what you're investing in is "the future". Investors are betting that these companies have a LOT of growth left. That they're still infants as far as where there businesses are going. Whether that's right or not is another story and we really just don't know that, so any discussion is just guessing. And when you invest in this type of company (huge P/E big growth possibilities) that's all you're doing. You're putting on your thinking cap and asking yourself.... does this COMPANY - not the stock -- have legs? You'll have to separate the STOCK from the COMPANY... as the stock will follow the company. If there's big growth in customers and earnings and eyeballs or whatever it is that the company is measured by... then the stock will follow.

HERES the issue you'll eventually have to deal with as far as the STOCK goes....

IF they "miss" the whisper number - if they miss the projected growth numbers OR if the MARKET turns south --- the air comes out of these kinds of investments far faster than a dividend stock which is supported by the dividend payment percentage - which grows as a percentage as the price of the shares come down. What happens is that a LOT of people bought at far lower prices -- and they'll "lock in" their profits FIRST in these kinds of investments (which means they'll sell these to raise cash FIRST) --- more sellers than buyers and the price comes cascading down. That's the kind of thing someone like me looks for.... that's when I'd be a buyer.... I always have huge cash positions - I don't sell to raise cash - I already have it.... and I know where the price can go and assume they'll still have huge growth potential so if I missed it the first time around MAYBE (big if) I'll get a chance to buy some on sale.

In the meantime -- if you have a double -- so what if it goes down 30% -- it's down 30% from a double!! Good for you if you can stomach that... and if you're young - you should be able to. The hell with P/E's on this kind of stuff - what counts is making MONEY.... and nobody ever paid their bills with P/E...

P/E DOES count on big stable companies! Don't confuse the two types of investments -- one is GROWTH -- another is steady eddy or dividend paying etc. WE'RE talking about big growth type investments here. Monster Energy - NetFlix - FaceBook - Tesla.... NOT GE or MERCK