Value At Any Price - Good Post On Overpaying For High Return On Invested Capital

Excellent point from Harvest Investor about the new fad of willingly overpaying for companies with high returns on invested capital:

"[D]eveloping investment theme that overpaying for a high ROIC company is somehow okay. The future earnings power of that business will bail you out no matter what you pay, so who care[s] about current price.

Can this (mathematically) happen? Absolutely. But it’s a slippery slope from that thought back to the 'nifty-fifty' of the 1960s or the tech bubble of the 1990s. In both instances, and increasingly among ROIC aficionados, an infinite future earnings stream discounted back (at any discount rate) is still infinite, so it doesn't matter what you pay for a stock today. At the risk of stating the obvious, this is a mistake. (Read about the St. Petersburg Paradox, which is also discussed in the excellent Fortune’s Formula)."

Nate Tobik adds in the comments:

"This new buy ROIC at any price doesn't look much different from the standard buy and hold blue chips at any price that's been popular forever."