PE Above 1,000: Majority of Stocks with PE Above 1,000 Turned Multibaggers in Just One Year
Stocks with PE Above 1,000: 6 Out of 9 Turn Multibaggers in Just One Year
The Great Dilemma: Low PE vs. High PE Growth Stocks
Investing in the stock market often feels like a game of tug-of-war, where one is constantly pulled between different investment strategies. One such dilemma that leaves even seasoned investors scratching their heads is the choice between low PE (Price-to-Earnings) stocks and high PE growth stocks. It’s a classic battle between value and growth, stability and potential, certainty and excitement.
The Allure of Low PE Stocks
Low PE stocks, often seen as undervalued, are attractive for their seemingly lower risk. They offer a way to buy into companies at a lower price relative to their earnings. Historically, low PE stocks have been associated with steady, if not spectacular, returns. They’re the reliable, steady tortoises in the investment race, plodding along without much fanfare but delivering consistent performance.
The Temptation of High PE Growth Stocks
On the other side of the spectrum, high PE growth stocks command higher prices due to their growth prospects. These are the hares in the race, often sprinting ahead with significant price appreciation fueled by high expectations of future earnings. Investors are willing to pay a premium, betting on these companies’ potential to disrupt markets and generate substantial profits.
But how have high PE stocks performed historically, particularly those with PEs above 1,000?
PE Above 1,000: A Look at Historical Performance
Stocks with PEs above 1,000 are rare and often belong to companies that are either in nascent stages with minimal earnings or those experiencing a phase of exponential growth. These astronomical PE ratios usually indicate that the market has high expectations for the company's future earnings.
Below is a list of stocks trading with a P/E multiple over 1,000 and their respective one-year returns:
From the above table, we can see that 6 out of 9 stocks turned multibaggers in just one year.
The Risks
However, not all high PE stocks turn out to be Amazon. The risk with high PE stocks is that they’re often priced for perfection. Any hiccup in growth or failure to meet market expectations can lead to sharp declines in stock prices. The higher the PE, the greater the fall if the company stumbles.
Making the Decision
So, should you buy a low PE stock or a high PE growth stock? The answer isn’t straightforward and depends on your risk tolerance, investment horizon, and market outlook.
For Risk-Averse Investors: Low PE stocks offer a safer bet, providing stable returns with less volatility.
For Risk-Tolerant Investors: High PE growth stocks can deliver spectacular returns, but be prepared for potential roller-coaster rides.
In the end, diversification is key. Balancing your portfolio with a mix of low and high PE stocks can provide both stability and growth, allowing you to navigate the market’s ups and downs with confidence.
Disclaimer: The article is for informational purposes only and not investment advice.