Perhaps listening to Warren Buffett explaining how companies are businesses, and how you are buying part of the company will help explain the difference.
For example, when Meta P/E was 9, people should have said to themselves “hey, that’s an incredible opportunity”, rather than waste all that time hating on the company.
Crypto could recover if enough people “believe“ but there’s no real business
Why is that an incredible investment opportunity? Something like ~53% of the voting power is owned or controlled by Zuck, and there’s no indication that he has any plans to meaningfully return money to shareholders,* rather than continuing to write ten-digit company checks every month to fund the metaverse.
If you want to buy META as a bet on Zuck himself or the success of their conception of the metaverse, that’s one thing, but I don’t see how this is a reasonable value investment based on their current management and capital structure.
* I know Meta has done stock buy-backs from time to time, which are of course economically equivalent to a dividend (except more tax efficient), but from eyeballing their history of repurchases, it looks like they, like many issuers, managed to set billions of dollars of shareholder money on fire by repurchasing the stock while it was trading at rich multiples.
9 is the recent low, but presumably GP would consider 10 to be a good deal, too. Typically companies with a solid future making a reasonable profit are about 20 - 30; historically META is about in this range. If META still has "normal" prospects, then it is pretty undervalued.
However, this is not a Buffett view on things, as he evaluates based on intrinsic value rather than P/E. He also avoids tech companies because it's hard to figure out what their intrinsic value is. KO (Coca-Cola) for example, is going to grow about as much as GDP, it has a long history of 30% net profit, it has a huge moat so the dynamics of the company aren't likely to change. Thus one can actually attempt to evaluate its intrinsic value: what would you pay for a bond that earned 30% every year? Do the present value calculation and there you go. But what is META's prospects 10, 20, 30 years from now? Hard to say, and the social media landscape keeps changing. So Buffett would not invest in META--a P/E of 9 might be a steal, but it might also be an indication that the prospects of the company are no longer so positive as they were two years ago.
(AAPL is a notable exception to Buffett not investing in tech, because of how their products reinforce each other to create a large moat. At this point I think it is also fairly likely that Apple will be around making computers for the foreseeable future--even OS 9 didn't kill them off, and now they have market leading hardware and a solid OS and compelling ecosystem. In this way of thinking, one could argue they have similar dynamics as KO, but with the advantage that they have growth prospects. They also are returning 30% to shareholders, mostly in the form of huge stock buybacks. Hence Buffett has been a massive buyer of AAPL recently.)
> a P/E of 9 might be a steal, but it might also be an indication that the prospects of the company are no longer so positive as they were two years ago
This is the key point right here.
Just looking at stats alone isn't enough to know that you're seeing "an incredible opportunity".
Why are you looking at trailing PE ? You are buying future profits, not past ones. (And btw, Zuck has already told his shareholders that he has no near-term plan for the profitability of his investments.)
Let's say all the money is in BTC, which is down 74% YoY. If you started with $100, you'd have $26. And then you lost half of it, which brings you to $13. So you'd be down 87%, which is on-par with many tech stocks.