At Berkshire Hathaway’s annual meeting this past weekend, Warren Buffett mentioned that most stocks are likely a bit pricey right now unless interest rates remain low for the next 5+ years. You don’t have to consult the Oracle at Delphi to know that paying 28x earnings for Church & Dwight right now is going to lead to total returns lower than the company’s growth rate because Church & Dwight’s valuation tends to settle in the 18-22x earnings range during words of 5%, 6%, and 7% long-term U.S. bond rates. That story plays out across hundreds of stock across the nation.
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