“Hit ‘em where they ain’t!” Such were the immortal words of Baseball Hall of Fame’er Wee Willie Keeler. While the words don’t technically make sense, it’s clear enough what Wee Willy meant, which is that you should hit the ball toward areas where there were no outfielders. A similar principal applies in military strategy, though there, one doesn’t so much hit them where they ain’t as one hits them when, and how, and from some direction which they weren’t expecting. The principal also applies to the stock market (by which I mean it can be and should be applied to the stock market, not that many people are choosing to so apply it).
Applied to the stock market, the principal means, simply, that in the long run, investors do better when they own sound investments that the rest of the market is ignoring than when they own the hottest, must-have stocks of the day. For those who are interested in finding these, there are many; I, and many other financial writers have pointed out that in some sectors of the market, even now, P/E ratios look strangely low when viewed alongside reasonable growth expectations, but is anyone interested in investing in such sectors. Ha! I laugh, not because the answer is no, but because the answer is no and that’s absurd!
Everyone is fascinated with technology stocks, and it is easy to understand why. Technology companies forge the future of mankind, so it is no surprise that they are often helmed by people with powerful visions, and of course, there is nothing so epic as watching such visions collide. Investors can’t help but use the products of these companies, and there is something to be said for investing in what you know, but there is also a large and growing problem: these companies are being valued based on their stock prices.
What’s wrong with that? Everything.