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Sell and Buy a New Life

Trying to satisfy an insatiable appetite for growth, investors don't mind placing big bets on companies such, expecting out-of-this world future performance.

As a result, Salesforce continues to enjoy a multiple that is sky-high and offends investors like me who stress realistic P/E ratios.

Disappointingly, the argument continues to be that valuation does not matter in the tech sector. That's all well and good so long the roulette wheel keeps spinning. But what happens when it stops -- and on the wrong color?

Though the company continues to generate a considerable amount of interest from investors, the odds are stacked against it because it is already priced to perfection while rivals such as SAP (SAP) produce higher margins and increased levels of profitability.

It's worth mentioning that hasn't earned a profit for almost a decade while its gross margins have shown some erosion over the past several quarters. Yet the stock rises.

In situations like these, one slip can be catastrophic. But will investors know what to look for? While the tech sector as a whole continues to lead the stock market, it seems that Wall Street is being reckless and cavalier toward valuations of stocks such as Individual investors would be wise to get a life and move on.

At the time of publication, the author held no position in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
Richard Saintvilus is a private investor with an information technology and engineering background and has been investing and trading for over 15 years. He employs conservative strategies in assessing equities and appraising value while minimizing downside risk. His decisions are based in part on management, growth prospects, return on equity and price-to-earnings as well as macroeconomic factors. He is an investor who seeks opportunities whether on the long or short side and believes in changing positions as information changes.
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