A Warning From 1972 — And Where We’re Finding Value Today
In 1972, the most celebrated stocks in America traded at an average P/E of 42x. Analysts called them the Nifty Fifty — Polaroid, Avon, Xerox, McDonald’s. The logic was seductive. These were exceptional businesses. Unique. Impervious to cycles. A buy at any price.
By 1974, they had fallen by an average of 60%. Most of the damage happened in just 18 months.
The lesson wasn’t that these were bad companies. The lesson was that finding a great business is only half the equation. The price you pay matters just as much.
Today, Costco trades at ~47x forward earnings. Walmart at ~42x. GE Aerospace at ~42x. We’ve been thinking about this parallel a lot lately — and we think it matters more right now than most investors realize.
On March 31 at 12:00 ET, I’m giving a 25-minute presentation where I’ll walk through exactly why this concerns us — and share four specific companies where we believe the market has done exactly the opposite, significantly underpricing quality businesses with clear catalysts.
One of those situations, Madison Square Garden Sports, has already started playing out. We published an open letter to James Dolan in June 2025 calling for a spinoff of the Knicks and Rangers. MSGS announced it would explore exactly that in February — and the stock has advanced roughly 50% since we wrote the letter.
If you’ve been following our work here, this presentation is the live version of how we think.
Hope to see you there.
— Jonathan