Originally Posted by
Snoopy
I am one of those people who would have said Xero was in bubble territory at $5. But guess what? Even with the benefit of hindsight, I would not change my view that Xero was in a bubble at $5.
Bubbles are always obvious with hindsight. As an investor though, I have to work in the present. That means not just looking at the share price, for that one measure alone is not sufficient to assess value. Xero has no earnings. It has great potential for future earnings. But the current share price seems to have already assumed the capitulation of the likes of Intuit. Without knowing if Xero will ever generate a profit, the incremental assumption that all competitors globally will capitulate seems to me to be a stretch too far for any positive cashflow type investor such as myself. If the Xero share price collapsed to $5 tomorrow I personally still wouldn't buy it.
RYM is in quite a different position with a solid track record of earnings and business plan execution and real and growing profits already on the table. If the RYM share price collapsed to $5 tomorrow I would buy, almost regardless of whatever piece of news caused such a share price collapse. The track record of RYM just cannot be ignored. That doesn't mean that you can't pay too much for RYM though. If anything, RYM might be in a value bubble today. Even a really excellent company can still become too expensive, relative to other investment opportunities out there. But RYM is not in a bubble in the sense that Xero is. At today's prices, I wouldn't buy either though.
SNOOPY