The Investment Thread (17 Viewers)

[bclemms]

I fundamentally disagree with the notion that PE rations mean less for tech stocks. Yes, you have to take into account their growth potential, but at the end of the day, a company's value is driven by their profit margins and ability to grow those margins.

So, while a PE ratio of 15 might be low for a tech stock, one with a PE ratio of 60 is probably way out of whack. It assumes exponential growth for many years, which is unrealistic given that major economic shocks tend to happen every 7-10 years.

PE Ratios cut to the core of economics 101. Something that bubbles are really good at distracting people from. Whether it be complex products or simply feeding off of FOMO the simple ideas of supply and demand, money supply and basic pricing structures get thrown out the window.

For anyone that says PE ratios do not matter I present a really easy scenario.

Pretend you are buying a business. Are you going to ask for financial records and look at the company's earnings, revenue and profit and compare it to expenses? Saying PE ratio doesn't matter is like not asking for those records. When you are buying stock you are buying a company.

 

[UncleTrvlingJim]

The G

The Great Reset 2022.

It was needed.

Government can kick the can, markets cannot.

I would have preferred from an overall economic health perspective a long trend of relatively flat stock prices -- simply because I know a lot of retirees have their portfolios balanced poorly with too much in stocks, so large market corrections are really harmful to them. This stock price down trend is going to be really painful to a lot of people.

But as someone who has a lot of cash (i missed out on the pandemic recovery surge b/c I didn't believe in the fundamentals of the market), this will be beneficial to me b/c it puts valuations back in a range that i'm comfortable with.

 

[Saint_Ward]

I fundamentally disagree with the notion that PE rations mean less for tech stocks. Yes, you have to take into account their growth potential, but at the end of the day, a company's value is driven by their profit margins and ability to grow those margins.

So, while a PE ratio of 15 might be low for a tech stock, one with a PE ratio of 60 is probably way out of whack. It assumes exponential growth for many years, which is unrealistic given that major economic shocks tend to happen every 7-10 years.

When I finish reading this book, and my brain is less covid hazy, I'll explain the point better. I agree, PE ratios matter. The question is what ratio makes sense for a type of tech business. Does PEG, and other metrics capture that or not? AMZN hasn't had an attractive PE for over a decade, yet it's been an amazing investment. And historically they've been willing to overspend on their infrastructure build at the expense of now for bigger future growth. The point was, as more Tech loads up the top of the S&P500, a PE of 15 may not correlate as well, where a PE of 18-20 might be a better fit.

AMZN may also be near as big as they'll get. But, like many value investors say, it has quite the moat around it to fend off competitors. Walmart spent a ton to take on AMZN's online store, and it pretty much has failed.

 

[Turfie]

BBBY now at the lowest marketcap since at least 2000.

 

[UncleTrvlingJim]

When I finish reading this book, and my brain is less covid hazy, I'll explain the point better. I agree, PE ratios matter. The question is what ratio makes sense for a type of tech business. Does PEG, and other metrics capture that or not? AMZN hasn't had an attractive PE for over a decade, yet it's been an amazing investment. And historically they've been willing to overspend on their infrastructure build at the expense of now for bigger future growth. The point was, as more Tech loads up the top of the S&P500, a PE of 15 may not correlate as well, where a PE of 18-20 might be a better fit.

AMZN may also be near as big as they'll get. But, like many value investors say, it has quite the moat around it to fend off competitors. Walmart spent a ton to take on AMZN's online store, and it pretty much has failed.

OK, that makes more sense... I agree that PE ratios for high growth stocks can be higher and still be attractive compared to low growth stocks. But we've seen PE ratios for the S&P in the 30's recently, even if it's tech/growth heavy, that seems untenable. It's about 19 now, which is significantly more attractive.

Obviously it can still go down from here (and most likely will), but I think timing the market is a fools game, so I'll probably start dollar cost averaging buys around now.

 

[Turfie]

When I finish reading this book, and my brain is less covid hazy, I'll explain the point better. I agree, PE ratios matter. The question is what ratio makes sense for a type of tech business. Does PEG, and other metrics capture that or not? AMZN hasn't had an attractive PE for over a decade, yet it's been an amazing investment. And historically they've been willing to overspend on their infrastructure build at the expense of now for bigger future growth. The point was, as more Tech loads up the top of the S&P500, a PE of 15 may not correlate as well, where a PE of 18-20 might be a better fit.

AMZN may also be near as big as they'll get. But, like many value investors say, it has quite the moat around it to fend off competitors. Walmart spent a ton to take on AMZN's online store, and it pretty much has failed.

What book are you reading?

 

[Saint_Ward]

What book are you reading?

Where the Money Is: Value Investing in the Digital Age by Adam Seessel.

Random story. I was shipping a business package at work, and saw that the shipper was wrapping and shipping a ton of the same book. Asked him what was up. Basically said the CEO was sending this book to a bunch of his friends/business contacts. Not sure if it was an endorsement or if our company is mentioned in it, but I took a chance on it. They're smart people and so far, it's been pretty easy to read.

When I looked up Seessel on YouTube, he's in that Buffet school of value investing and seems pretty smart.

I'm only on chapter 2, and I may be too hazy to understand it well enough, but I figured I'd just re-read a few chapters later, if needed.

 

[Turfie]

Where the Money Is: Value Investing in the Digital Age by Adam Seessel.

Random story. I was shipping a business package at work, and saw that the shipper was wrapping and shipping a ton of the same book. Asked him what was up. Basically said the CEO was sending this book to a bunch of his friends/business contacts. Not sure if it was an endorsement or if our company is mentioned in it, but I took a chance on it. They're smart people and so far, it's been pretty easy to read.

When I looked up Seessel on YouTube, he's in that Buffet school of value investing and seems pretty smart.

I'm only on chapter 2, and I may be too hazy to understand it well enough, but I figured I'd just re-read a few chapters later, if needed.

Thanks. Going to get the Ebook.

 

[Turfie]

This is the Nasdaq composite. 2018 dip vs today. Any of you think this current dip is just a correction without a crash?

 

[Saint_Ward]

This is the Nasdaq composite. 2018 dip vs today. Any of you think this current dip is just a correction without a crash?

Hard to say. I think the fundamentals are strong. We just have some supply side issues that can make a whole lot.of things better.

But even with both major dips, the current value is about double 2017.

 

[UncleTrvlingJim]

This is the Nasdaq composite. 2018 dip vs today. Any of you think this current dip is just a correction without a crash?

Near term is definitely difficult to predict. The biggest challenge to the economy right now is on the supply side. Demand is very strong and there is plenty of money floating around. We had built our economy on just-in-time delivery which is a wonderfully cost-efficient model and when it's running smoothly allows for easy transitions to new products and markets... however, as we are seeing, it assumes smooth supply chains in perpetuity.

So, the question is, can we smooth out our supply chain while simultaneously gently slowing down demand without triggering a recession? My guess is probably not. In which case you're looking at a recession and given our massive debt load, we have fewer tools to combat the recession.

I'm mildly pessimistic, but I also don't think it'll be catastrophic.

 

[efil4stnias]

So fed is contemplating .75 basis point move announcement vs .50

Rip that band aid off and move on.

 

[Saint_Ward]

Interesting discussion. NSFW language.

 

[SaintInBucLand]

Interesting discussion. NSFW language.

Yellen already dismissed this before congress.

Janet Yellen Rejects Idea Corporate Greed Is to Blame for Inflation

Treasury Secretary Janet Yellen rejected the idea that corporate greed is causing the US inflation surge, differing with fellow Democrats who have accused big businesses of price gouging.

www.bloomberg.com

It's a nice populist talking point, but the fact of the matter is we kept printing and printing. That coupled with supply chain, the pandemic, the Federal Reserve's handling of the situation by calling it transitory and not addressing it sooner and our energy policy it was pretty clear to see what was happening if people were being honest with themselves.

My portfolio was up over 40% today because of all my short positions that I entered into last week(I even shorted Tesla).

I just don't have any confidence in those making the decisions right now and it has rewarded me.

 

[SaintInBucLand]

So fed is contemplating .75 basis point move announcement vs .50

Rip that band aid off and move on.

Me waiting to get more puts on the indexes.