The Investment Thread (6 Viewers)

[Turfie]

Carvana is $28 a share. What a crazy drop for that company.

 

[Turfie]

Kinda had a proud moment. My brother likes to have a fun portfolio. Yesterday he had $200 just to throw on something.

I recommended that setup of TBLT may produce a quick flash up. He bought in at $1.48ish are noon yesterday and sold it this morning in PM at $3.19 ish. Turned $200 into $433.

 

[Turfie]

Crazy how much attention this one 550 million dollar company gets. But this is almost a first for me. Bank of America agents visited a few BBBY stores and wrote about air conditioning.

 

[Mr. Blue Sky]

Crazy how much attention this one 550 million dollar company gets. But this is almost a first for me. Bank of America agents visited a few BBBY stores and wrote about air conditioning.

This has been going on , in various ways , at retail for a long time.. i remember shopping at Target in Houston TX when i lived there circa 14 or 15 yrs ago.. i noticed that it seemed particularly stuffy and humid one time, so when i got to the register to check out i asked the cashier if their AC was broken (?) She said no, that the air conditioning system for each store was controlled from the Target headquarters in … Minnesota…. Im sure they totally have their finger on the pulse of Texas heat & humidity in Minneapolis …How much do you wanna bet their MN stores weren’t freezing in the winter ??


Honestly , it prompted me to shop much less at Target becuase i thought it was a boneheaded , chintzy way to run a store/company .

 

[Turfie]

The hilarity in BBBY continues. Max pain is a share price value that results in the least amount of calls and puts that end up in the money.

Stocks that tend to be volatile can get a lot of action.

BBBY got 20% of its daily volume in the last 5 minutes of trading today.

Max pain (again the price where option writers end up paying out the least) was $7.00 for BBBY.

The closing price of BBBY wasn’t $6.99 or $7.01. It was $7.00.

 

[Saint_Ward]

So, to revisit the Tech P/E stuff, I've gotten a lot further in this book, and I want to hit a highlight idea of it. (Where the Money is - Adam Seessel)

It was a realization that the way value investors look at Tech is misguided, because capital expenditures (thus return on investment) are very different for most tech companies (it also lead him to discover other good non-tech companies).

The way he puts it all together is the BMP checklist. B = Business, M = Management, P = price.

Business Quality - Does the company have a low market share? In a large and growing market? Sustainable competitive advantage?
Management quality - Does management think and act like owners? (vs custodians) Do the executives understand what drives business value?

Price - can you arrive at a reasonable earnings yield, over 5%?

The price part is what gets manipulated, because of how standard GAAP accounting skews towards tangible assets/Capital, vs R&D, which is pretty much all Tech spends on. I'm not an expert at this, so I'm going to paraphrase a bit from the book, but he does a much better job explaining his logic, and borrows Buffett's, being "approximately right, is better than precisely wrong"

R&D for a tech company, like Intuit, is like new factories and inventory is to more mature "Industrial age" companies. The difference is accounting practices force Tech companies to expense R&D immediately, but Cap Ex on a new factory can be expensed over multiple years. So, general accounting rules biases Tech companies to having depressed Earnings, thus higher P/E multiples. i.e. Campbells Soup can spend the same amount as Intuit, but based on spending on Cap Ex, vs R&D, Cambells Soup can show higher earnings, with similar Sales totals. Do we really think Campbells Soup is a higher margin business than Intuit?

That's one of many examples used in the book, and Seessel gets into how he estimates a better way to look at the 'earnings'. He calls it Earnings Power. And he uses the idea of Return on Capital, and how these Tech companies (the good ones) focus on future growth and future profits, not just current ones. Amazon has always been very transparent about that. They famously re-print Bezos' 1997 letter outlining their plan.

https://www.sec.gov/Archives/edgar/data/1018724/000119312513151836/d511111dex991.htm

So, as more Tech companies dominate the S&P 500, the P/E ratio will increase, artificially, because of how standard accounting rules deal with them. However, it's not always a value bubble. It's a data distortion. At the same time, prices CAN get out of whack. But you can't use the standard P/E to explain it.

 

[SaintInBucLand]

Absolutely crushed it today. Loaded up on puts when I saw the consumer confidence index and it was a fun ride down.

 

[Turfie]

This has been going on , in various ways , at retail for a long time.. i remember shopping at Target in Houston TX when i lived there circa 14 or 15 yrs ago.. i noticed that it seemed particularly stuffy and humid one time, so when i got to the register to check out i asked the cashier if their AC was broken (?) She said no, that the air conditioning system for each store was controlled from the Target headquarters in … Minnesota…. Im sure they totally have their finger on the pulse of Texas heat & humidity in Minneapolis …How much do you wanna bet their MN stores weren’t freezing in the winter ??


Honestly , it prompted me to shop much less at Target becuase i thought it was a boneheaded , chintzy way to run a store/company .

This story has made its way to some pretty decently sized publications.

Earnings report tomorrow morning. Ready for the dip. This may keep dipping until after the annual report where Cohen’s guys get voted in and the bad guys voted out.

 

[Turfie]

I remember when ROOT and Carvana made a deal together. Just now I was thinking that I think Carvana has dipped since that news drop.

Then I checked the dates and had to take a step back.

 

[Mr. Blue Sky]

I remember when ROOT and Carvana made a deal together. Just now I was thinking that I think Carvana has dipped since that news drop.

Then I checked the dates and had to take a step back.

I cant speak to the Root thing, but I’ve always thought that the Carvana concept was flawed.. i realize it was popular for a while , but it always seemed gimmicky to me that you order ur car or truck online, sight unseen, and then they deliver it to you or even worse, you pick it up at a giant vending machine (seriously), i have seen them in several cities… by contrast, ive bought my last three vehicles at Carmax, it’s a solid business model where you can search their online inventory throughout the country, find exactly what you want , then test drive it and check it out .. im a big fan of the way Carmax works .

 

[Saint_Ward]

I remember when ROOT and Carvana made a deal together. Just now I was thinking that I think Carvana has dipped since that news drop.

Then I checked the dates and had to take a step back.

Carvana has really grown their revenue, but they are losing money the last couple years, so I'm not surprised they're being punished for it. Also, saw a news article that's saying they have had some trouble registering cars for people.

But, if their management is doing real steps to become profitable, and that revenue growth continues, they could be a heck of a deal. I don't know enough about what makes their business better than others, and how good of management they have.

 

[bclemms]

Carvana has really grown their revenue, but they are losing money the last couple years, so I'm not surprised they're being punished for it. Also, saw a news article that's saying they have had some trouble registering cars for people.

But, if their management is doing real steps to become profitable, and that revenue growth continues, they could be a heck of a deal. I don't know enough about what makes their business better than others, and how good of management they have.

The problem with companies that do well while losing money is they only way they can make money is buy cutting corners and raising price. Then suddenly they are just a high priced option that sucks. It sure is a hard corner to turn. Paying to gain market share is easy, making money is much more difficult.

 

[Turfie]

Earnings report tomorrow morning. Ready for the dip. This may keep dipping until after the annual report where Cohen’s guys get voted in and the bad guys voted out.

Well. I didn’t expect major changes till the annual meeting until later. But Mark Tritton is no longer the CEO as a leadership shakeup is now underway.

 

[SaintInBucLand]

The problem with companies that do well while losing money is they only way they can make money is buy cutting corners and raising price. Then suddenly they are just a high priced option that sucks. It sure is a hard corner to turn. Paying to gain market share is easy, making money is much more difficult.

This is what worries me about Rivian. Especially now with the Ford Lightning hitting the market and people taking notice. The price point absolutely blows away Rivian when it comes to the base model.

This is a great video. Love how he says the Lightning is the iPhone of trucks.

 

[Mr. Blue Sky]

This is what worries me about Rivian. Especially now with the Ford Lightning hitting the market and people taking notice. The price point absolutely blows away Rivian when it comes to the base model.

This is a great video. Love how he says the Lightning is the iPhone of trucks.

I think Ford has done a lot of things right with the Lightning, but the one thing i think they’ve done that’s extremely smart is actually very simple- they made an EV (the Lightning) that looks and feels like a ‘regular truck’…. Me myself, i dont have a problem with the futuristic looks of a Tesla, or even the quirky looks of a Prius.. but the vast, vast majority of Americans are extremely adverse to change and want somehting more familiar to them.. and of course the price point helps immensely as well .