Fundamental Securities Analysis Still Matters

With a number of key industries seeing valuation multiples the likes of which the world has (almost) never seen (except for maybe a few previous bubbles in our history, wink wink), the question of whether the valuation game has truly changed is beginning to grip much of the discussion among every day investors like you and me.

With emerging technologies, cryptocurrencies, and cannabis the talk of the town, one thing has become apparent to me in recent months: fundamental securities analysis no longer matters in a number of sectors.

Whether you view cryptocurrencies such as Bitcoin as a currency or a security, billions of dollars of value each day is gained or lost by those who have put their faith in the digital blockchain store of value.

With the top four cannabis companies in Canada now achieving a combined market capitalization of more than $10 billion, and companies like Shopify Inc. (TSX:SHOP)(NYSE:SHOP) currently valued at nearly $13 billion with largely negative earnings, investors like myself simply have a hard time fathoming a world in which these valuations make sense.

Perhaps doing things the old fashioned way is out of style. Perhaps investing in companies with track records of at least 10 years and strong balance sheets with the ability to return value to shareholders is outdated. And perhaps suggesting that a multi-hundred-year payback on an investment is unrealistic is incorrect. I don’t know.

What I do know, however, is that cryptocurrencies, cannabis companies, and emerging tech companies with forward earnings valuation multiples over 100 are out of the question for me.

Invest wisely, my friends.