I subscribe to Charlie Munger’s view concerning value investing. “Value” does not necessarily equate to a low P/E multiple. Value investing in Mr. Munger’s view consists of finding companies that in the future are likely to be valued significantly higher than they are presently. Too often companies that are valued at deep discounts to the peer group are valued as such for a reason: low market share, little revenue growth if any, legacy technology, high customer attrition, etc. High quality companies in my experience do not trade at discounts to the peer group, nor do they require P/E multiple expansion to drive their valuations higher. High quality companies often enjoy higher stock prices over time as a result of consistently growing Earnings and EBITDA. Under this scenario flat P/E and EBITDA multiples are just fine.
