First off there’s a massive difference between what is a good company and a good stock to invest in, and here I’ll just simply use BIGC as an example. Its an exceptionally well-run company, operating in a growing industry, and with strong financials. Over the past few months its been trading over Bt. 200/share at a trailing PE of 30x.
BIGC’s 2Q12 earnings had come out during the week and they still achieved growth of 27% YoY and then this is what happened to the stock price.
And this is the issue I have in investing in high PE stocks, the moment that the growth targets set by analysts/investors are missed, even if just slightly, even if its still a great company, even if its still growing at great rates, the stock price can just suddenly collapse within a couple of days.