There are technical distinctions between investing versus speculating. Nevertheless, both concepts are often thought about or utilized interchangeably. Moreover, there are nuanced distinctions between a rational or well-thought-out speculation versus outright gambling. In the former, there may be logical realities that support speculation when circumstances are in your favor. However, with gambling, the odds are virtually always against you. On the other hand, gambling can occasionally deliver monumental returns precisely because the odds are so strongly against you. Furthermore, if you are fortunate enough to hit that one in a million bet, you could be set up for life. But most of the time when purely gambling, you end up being a net loser in the long run.
With the above said, I believe we are currently experiencing a bifurcated market. This simply means that there are both attractively valued stocks to be found and there are significantly overvalued momentum stocks. Even a card-carrying value investor such as yours truly cannot deny the incredible performance that momentum stocks are generating currently.
This is especially true for high-profile tech stocks such as Apple (AAPL) or Microsoft (MSFT). You can also throw Visa (V) and MasterCard into the fray. At this point I want to be clear that there is no argument from me that these are some of the best companies on the planet. In other words, if I were only looking at the businesses behind the stocks, I could not fault any of the above names. In truth and fact, I had great success with past investments in all four. On the other hand, when looking at current stock values for each of these businesses, they take my breath away. As good as each of these companies are, there is simply no mathematical or practical fundamental calculation that justifies current valuations. The only salient factor or virtue for each of them is popularity, a.k.a. – momentum.