An inflection point in stock prices can be seen by the overall market, but it can also be seen by certain poster child stocks. In 2000 one such poster child was JDSUniphase. Another was AOL Time Warner. Both JDSU and AOL were buying companies using their highly overvalued stock. (Berkshire Hathaway did the same with General Re.) I was especially aware of JDSU, as JDSU bought the company I was working for. In 2000 JDSU was selling for 23 times sales, and had negative earnings. Even the pros thought the good times would continue to roll. At the beginning of 2000 Liz Ann Sonders picked JDSU as her best stock for the next 10 years. The stock price then fell by 98%. The executives at Time Warner should have seen the same with AOL.

Today's poster child, I believe, is Tesla. Before the 2024 election TSLA was selling at absurdly high prices, 9x sales and 140x trailing earnings, as compared to the other major car companies selling at about 0.3x revenues and 6x earnings. After the election TSLA stock rose 90%, only to fall back today to pre-election prices. And again the pros don't see it. Morningstar estimates TSLA's fair value to be $250 per share, versus a stock price today of $250. Come on. Tesla is not some fantastic new technology that cannot be replicated. It's just a car company.