THE GHOST TRAIN
THE FINANCE GHOST: Understanding multiple risks
Not only are gold shares trading at high prices, some blue-chip companies’ shares are as well, and they will probably not unwind as can normally be expected
There’s an exclusive club of companies on the JSE that trade at earnings multiples of more than 20. These are high-quality businesses that represent the best of the best, with local asset managers piling into their shares as about the closest thing that you’ll get to an equity “safe haven” — with the word “safe” working particularly hard here. Remember Transaction Capital? I certainly do.
This phenomenon isn’t just found on the JSE, either. A similar story has played out in the US market, which is why you see Costco trading at a p:e of close to 60. Despite all the market drama we’ve seen this year, the share price is actually up 9% year to date! Why is this happening?..
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