What would you pay more for—Apple Computer or Colgate Palmolive?
I’m always impressed and humbled by those contributing to my blog comments. And that’s why this post is asking for your feedback and opinion directly on a single question.
Speaking to a group of university students, Bill Gates said:
“I think the [earnings] multiples of technology stocks should be quite a bit lower than the multiples of stocks such as Coke and Gillette because we are subject to complete changes in the rules.”
His biggest holding, Microsoft is trading about 30% lower than the S&P 500, currently. This pricing probably aligns with Gates’ philosophy.
But Apple computer is 46% more expensive than the average S&P 500 stock.
Which statement has the highest degree of certainty?
That Apple computer will have higher earnings in 2020 than in 2010 – or that Colgate Palmolive will have higher earnings in 2020 than they do today?
And do you agree with Gates?
Should Apple have a lower PE ratio than a business like Colgate Palmolive?