It hasn’t been easy to be a value investor recently. High multiple stocks have climbed continuously higher as most value investors wait diligently and patiently for lower prices. All good value investors know that this is the way things typically unfold. Momentum stocks will periodically reach unfathomable levels, but it still is unsettling to watch the market work in such an antithetical way to what sound judgment and logic would dictate.
Still, faithful value investors also know that value is the only reasonable and time tested approach to earn consistent long term returns on meaningful amounts of savings. So we wait anyways, even as short term price action seems to discredit our approach.
Below is a chart to remind us that in the end value does matter. The companies below are the ten stocks (ex-healthcare) which 10 years ago sold for 10x sales with a $10 B market cap. All except for one did significantly worse than the S&P 500 over the next ten years, and four declined over the period. Today there are 15 companies which would fit into this group, including Facebook, Visa, Mastercard, Linkedin and Tesla.