At some price, a great companys stock is expensive at some price, a lousy companys stock is cheap. The basic elements of the Nifty Fifty story are sound: with the spectacular exception of Wal-Mart, the glamour stocks that were pushed to relatively high P/E ratios in the early 1970s did substantially worse than the market, in both the short and long run.Ī fundamental investment maxim is that, "A great company is not necessarily a great stock." No matter how good or bad a companys management, no matter how large or small a companys profits, no matter how bright or bleak a companys prospects, the attractiveness of a companys stock depends on its price. On both lists, there is a substantial and statistically persuasive inverse relationship between P/E ratio and subsequent long-term performance. The 24 stocks that appear on both liststhe unambiguously Terrific 24have done substantially worse than the market. Siegel uses a plausible list, but a competing list is frequently cited as the Nifty Fifty. Jeremy Siegel argues that this story is wrongthe long-run performance of these investor favorites justified their seemingly high prices. Claremont, California traditional Nifty-Fifty story is that the prices of growth stocks rose to unreasonable heights in the early 1970s, as evidenced by their subsequent crash.
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