@dumboinvestor your entire thesis and point of discussion seem to be that if institutions are paying a very high PE, therefore the company deserves it and it will sustain. This is grossly incorrect. Overvaluation persists for a time period, sometimes years, because of many years. And when the overvaluation bubble bursts, it takes years for the stock price to get back to previous levels.
Take a look at the stock of Microsoft, a great company, which took 16 years to get back to levels seen in 2000 during the dotcom boom. P&G US, arguably the biggest FMCG company in the world, took 5 years to recoup its 2000 highs, then another 5 years to get back to its 2008 highs. Similarly, it took Colgate-Palmolive 7 years to break out of its 2000 highs.
The simple point is paying too high a price is a recipe for disaster. Stocks, over 100 years of traded history, have NOT sustained at an extremely high PE for very long. Mean reversion inevitably happens and moderates the price. It can happen today, tomorrow or it may not happen in the next 1 year. The timing is not predictable. But what is sure is it will happen. The higher the price paid, the more the pain in store.
The rational thing to do is to side-step such extremely expensive companies or if one is compelled for some reason to buy it, to have a low allocation. There are 5000 odd companies traded in India. We don’t need more than 20 good stocks in our portfolios.