No. of Recommendations: 3
"Valuations do always mean revert."
Yes, basically, but to be pedantic, valuations do not mean revert; they cycle about the mean. If the historical mean stock P/E is 15 (or whatever) and the current P/E is 15, having recently come down from 20, then the expected forward P/E is below 15, whereas if the mean stock P/E is 15 and the current P/E is 15, having recently come up from 10, then the expected forward P/E is above 15. This is why plots of return versus P/E are fat in the center. The return at a P/E of 15 depends on whether the P/E is on the down-cycle or the up-cycle.
Sorry to be pedantic.
