Dealing with high priced stocks

Romano Sala Tenna

Katana Asset Management

There is no such thing as a perfect stock, but there are stocks that are priced to perfection. Some examples in Australia include REA Group, Domino’s Pizza, Aconex, Bellamy’s, and Cochlear. All of these companies are trading on earnings valuations between 150% and 300% above the market average. And, give or take, all these companies continue to trade higher day after day. For many investors, this can elicit emotional responses ranging from envy to despair. So as a professional investor, how do we treat already high-priced stocks that just keep on rising in value? As with everything in investing, we cannot determine the right course of action until we understand the cause of the action. In other words, we need to understand what is driving the share price in each instance. For purposes of illustration and simplicity, I have broken these causes down into three categories: The Good, The Ok and The Ugly. Read the full article here: (VIEW LINK) or watch the video about earnings quality below:


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Portfolio Manager
Katana Asset Management

Katana Asset Management was founded in September 2003 as a boutique investment management firm. Katana employs an all opportunity investment mandate being style, sector and market cap agnostic.

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