In this thread I want to just forward test a simple theory...
On the market there are expensive stocks and there are cheap stocks. "Expensive" stocks enjoy high PE multiple, high growth expectations and lower dividends. Conversely, "cheap" stocks generally have lower PE multiple, low or negative growth expectations and (potentially) higher historical dividends.
Many investors are wired to look for cheap stocks, hoping for a rise in value. But I wonder if a basket of expensive stocks would indeed outperform a basket of cheap stocks over a 2-5 year timeframe. If it does, it means that the market actually priced the stocks correctly (i.e. stocks were expensive or cheap for a reason).
So I have picked 20 stocks that appeared expensive and 20 stocks that appeared cheap... it's nothing more than a superficial scan of PE and my shallow understanding of the stock. I will try to include some deliberated diversification amongst different sectors. I will also avoided resources, as changes in commodity price would over-ride any meaningful findings from this exercise.
I will put up the 2 lists tomorrow... but in the mean time if you like to nominate some stocks for either list, please feel free to contribute (I don't guarantee it will be included).