Yet, investors insist it remains a good bet and think that a price of $145 today is great value while its growth prospects do not support such a high P/E.

What's more, even on the most bullish assumptions, the stock remains expensive. So I question the rationale in choosing Salesforce over Apple. Even if the term "diversification" is applied it still wouldn't make sense.

This brings us to Facebook, the poster child for valuation disconnect. I once reminded investors the company had no business being compared to Apple, or for that matter Amazon.

However, we have since come to realize that investors had other ideas, many of which they now regret. Consider how easy it would have been to assess Facebook's valuation worthiness by applying Apple's logic.

The fact of the matter is, investors would have saved themselves a considerable amount of heartache if they realized the failed logic of valuing a company that "does not make anything" at $100 billion. Making matters worse was the idea that Facebook's trading multiple would top that of Apple, which makes virtually everything that consumers can't be without.

Instead, what happened was that investors decided to make up their own minds as to how to value Facebook despite any signs of weakness the company might have warned about.

Today, with the stock trading over 50% below its initial public offering high of $45, investors are ready to punish the company instead of striving to understand the obvious lesson.

Facebook's challenge remains trying to prove the value of social media. Not necessarily its relevance -- that much is known. What is not known is how much it is worth.

Bottom Line

So the question is, do valuations really matter? When all of these points are put together it is staggering how undervalued it makes Apple appear - even today. It doesn't make much sense.

Or is it better to invest on a more obscure metric? Investors will typically send a company's stock higher on the assumption that in 12 to 24 months from the time of purchase the stock will grow and be met by increased value. Except it doesn't always work. Not every company's promise is returned in value.

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