I'm short spls and long omx in a two for one ratio as of friday open and pleased but let's see what the upcoming week brings Fell that if funds quit buying she will decline and If funds need to raise cash she will decline, pe is larger than my ...
>>SPLS has been trading at a trailing P/E of around 40-50<<
Before the bear market a lot of stocks were too high..."New Era" thinking, and all that..... That's changed. 30x-40x-50x p/e multiples are strictly bull market phenomenons, leaving zero margin of safety** for mild recession or other disappointment.
20x is about the most any stock in the highly competitive, highly recession-sensitive retail business deserves. Staples doesn't have the exclusive patent on a cure for the common cold, after all -- they're just a retailer selling paperclips and computers.
A 20 p/e on '99 estimate of .99 is generous, and as much risk as anyone should be willing to take on in this market. Anything above that is gambling and/or blind love.
**Benjamin Graham --Warren Buffett's famous teacher and mentor -- suggested in his classic investment textbook that if you had to boil investment wisdom down to three words, they should be: "margin of safety" -- a concept usually all but forgotten in bull markets.