David Einhorn: Make Sensible Investments In Companies Based On Earnings, Cashflows, And Assets, And Not On Top Line Story Stocks

In his recent interview with CNBC, David Einhorn recommended investors make sensible investments in companies based on their earnings, cashflows, and assets, and not in top line story stocks. Here’s an excerpt from the interview:

By the way I think that growth is just a generally… is a component of value. In other words values… companies are worth more if they’re growing faster. But sometimes growth has become sort of a shorthand for… we don’t really care what the valuation is at all, and we’re just going to buy it because we like the top line story.

There’s been a huge run over the last half decade or more of growth stocks as defined that way compared to value stocks, and I don’t know when it’s going to change.

There’s been a couple times where I thought that it might be turning our way but it’s been sort of a a false signal and I don’t know when it will change.

We’re going to stick to the view though that the value of a company has something to do with the earnings and the cash flows and the assets of the company and try to make sensible investments.

You can watch the entire discussion here: