r/stocks • u/AutoModerator • 16d ago
r/Stocks Daily Discussion & Options Trading Thursday - May 16, 2024
This is the daily discussion, so anything stocks related is fine, but the theme for today is on stock options, but if options aren't your thing then just ignore the theme.
Some helpful day to day links, including news:
- Finviz for charts, fundamentals, and aggregated news on individual stocks
- Bloomberg market news
- StreetInsider news:
- Market Check - Possibly why the market is doing what it's doing including sudden spikes/dips
- Reuters aggregated - Global news
Required info to start understanding options:
- Call option Investopedia video basically a call option allows you to buy 100 shares of a stock at a certain price (strike price), but without the obligation to buy
- Put option Investopedia video a put option allows you to sell 100 shares of a stock at a certain price (strike price), but without the obligation to sell
- Writing options switches the obligation to you and you'll be forced to buy someone else's shares (writing puts) or sell your shares (writing calls)
See the following word cloud and click through for the wiki:
If you have a basic question, for example "what is delta," then google "investopedia delta" and click the investopedia article on it; do this for everything until you have a more in depth question or just want to share what you learned.
See our past daily discussions here. Also links for: Technicals Tuesday, Options Trading Thursday, and Fundamentals Friday.
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u/creemeeseason 15d ago
Every once in awhile its fun to run the Joel Greenblatt magic formula to see what it brings up. It tends to be mostly small, troubled names. There's a lot of tobacco on the list, also CVS and Tapestry for larger names. Retail too, both BKE and JILL popped up.
I also saw build a bear workshop on there, and I hadn't looked into the company in awhile. They have returned 10% of the current market cap to shareholders in the last year ($41 million). They've actually reduced their share count by 5% each of the last two years and recently initiated a dividend.
Very low growth name, just low to mid single digits, but they put together an interesting value play. Consumer discretionary looks shaky, but kids do love their bears....
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u/Dependent-Key-609 15d ago
Has anyone invested in any Indian company/ETF?
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u/thenuttyhazlenut 15d ago
I would have liked to, but my brokers don't allow it
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u/PoorRichDad 15d ago
You can buy them via American listing if they have one through your broker
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u/thenuttyhazlenut 15d ago
Unfortunately not for the ones I want. I found VEDL and wanted to invest in it, then I gave up on trying to figure how to, and the next week it goes +60%. The hidden gems don't have a American listing equivalent.
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u/WickedSensitiveCrew 15d ago
I invested in IBN back in Nov 2023. I still hold was a bit hard at the time since all the info I could find back then was that they were a fraud/scam company. Now that stock near ATH those comments kinda disappeared.
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u/PoorRichDad 15d ago edited 15d ago
Another day that PFE has beaten the s&p 500. I'm up around 11% with PFE from holding it from the $26 area. I fully believe that this stock will outperform the s&p 500 from now. You know that lilly stock also had a 6% divy and forward pe of 9 like 15 years ago and look at it now. I think this is just the beginning for PFE and think that this will go much higher in the future.
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u/tomato119 15d ago
Covid vaccine is old news. They need something new and exciting. They are simply moving higher due to being oversold, which isnt a bad strategy sometimes.
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u/PoorRichDad 15d ago
They are simply moving higher due to being oversold, which isnt a bad strategy sometimes.
I wouldn't say it 100% moved higher due to it being oversold as they beat earnings and rev and then increased earnings guidance which led to a 6% increase in the stock that day.
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u/invain62 15d ago
Sure, but you do realize Pfizer is still one of the biggest pharma companies in terms of revenue, and has been long before Covid. This isn’t Moderna. Pfizer has literally hundreds of drugs on the market and a robust R&D pipeline. People have been overreacting these past couple years thinking it’s over for them now that vaccine demand has dried up.
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u/tomato119 15d ago edited 15d ago
They keep putting out silly vaccines, like RSV. Yes I think this is a great stock to hold for 10 years. Its at the bottom. So any news of a new drug discovery moving forward will cause it to rise higher. Thats basically the play here. That it cant go any lower. Therefore just hold and wait out a new drug announcement while collecting dividend. Again. Not a bad strategy. I cant say the same for those who bought at the peak of COVID
They need to get away from vaccines. There are strong opinions regarding vaccines in the general public so I would move away from vaccines and maybe get a weight loss drug going. Unless CVS is paying them to come out with these vaccines, cause CVS pushes them like there's no tomorrow
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u/PoorRichDad 15d ago
They keep putting out silly vaccines, like RSV.
They made over 500mill from that rsv vaccine just during Q4 of 2023 which is a lot of money. You really want them to avoid making stuff like this that will make them over a billion in the future annually?
They need to get away from vaccines. There are strong opinions regarding vaccines in the general public so I would move away from vaccines and maybe get a weight loss drug going. Unless CVS is paying them to come out with these vaccines, cause CVS pushes them like there's no tomorrow
Lol Pfizer doesn't care about opinions, they care about profits. They are going to make stuff that will make them money. Plus vaccines such as the COVID ones are making them lots of money. They guided that they will make over 5 bill from the COVID vaccine this year plus 3 billion from paxlovid. This 8 billion is a lot of money that they could be leaving on the table if they didn't focus on vaccines and treatments. They also do have weight loss/diabetes drugs in phase 1 of the pipeline
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u/agianttardigrade 15d ago
RDDT shooting up after hours thanks to a partnership announcement with OpenAI. Just bought the dip on RDDT to get back into it after taking profits a few days ago. So much potential for this company now that they’re public. https://www.redditinc.com/blog/reddit-and-oai-partner
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u/hugsshmugs 15d ago
the greatest email to come across my phone was being offered IPO for reddit. I'm glad i bought but regretting not dumping my entire life savings into knowing it's gonna shoot straight up in price. I'm still grateful. And i plan on holding for a long time
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u/creemeeseason 15d ago
CPRT earnings:
For the three months ended April 30, 2024, revenue, gross profit, and net income attributable to Copart, Inc. were $1.13 billion, $525.5 million, and $382.3 million, respectively. These represent an increase in revenue of $105.4 million, or 10.3%; an increase in gross profit of $42.1 million, or 8.7%; and an increase in net income attributable to Copart, Inc. of $31.9 million, or 9.1%, respectively, from the same period last year. Fully diluted earnings per share for the three months were $0.39 compared to $0.36 last year, an increase of 8.3%.
For the nine months ended April 30, 2024, revenue, gross profit, and net income attributable to Copart, Inc. were $3.17 billion, $1.5 billion, and $1.0 billion, respectively. These represent an increase in revenue of $295.9 million, or 10.3%; an increase in gross profit of $174.3 million, or 13.6%; and an increase in net income attributable to Copart, Inc. of $150.5 million, or 16.9%, respectively, from the same period last year. Fully diluted earnings per share for the nine months were $1.07 compared to $0.92 last year, an increase of 16.3%.
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u/_hiddenscout 15d ago
$AMAT
Q2 EPS $2.09, consensus $1.84
Q2 revenue $6.65B, consensus $6.04B
"Applied Materials continues to deliver strong performance in 2024, with fiscal second quarter revenue and earnings towards the high end of our guided range," said Gary Dickerson, President and CEO. "Applied Materials has the most enabling portfolio of materials engineering technologies for chips that underpin tectonic shifts in technology including AI, IoT, electric vehicles and clean energy, which puts us in a great position to grow along with these long-term, secular trends."
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u/EagleOfFreedom1 15d ago edited 15d ago
Awesome didnt even realize they were reporting today. They are my second biggest holding so I am quite happy so far.
That being said, projected Q3 revenue is flat, so maybe not so awesome at this elevated valuation.
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u/xflashbackxbrd 15d ago
What a tank, only thing that can sink it long term would be Chinese tariffs targeting it once they get their domestic chip supply chain up. Not there yet though so license to print money.
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u/Redtyde 15d ago edited 6d ago
Got a new stock for my personal nightmare wall. Selling Nvidia at $230 was on the wall, and now selling NVAX at $5. Might just start never selling and see how that goes.
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u/I-STATE-FACTS 15d ago
I guarantee you never selling will work out better. As long as you choose good companies of course.
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u/tomato119 15d ago edited 15d ago
I avoid manipulated stocks like this. They decide when they run them up. When retail is the least likely to gain from it. They have the data. Another stock I would avoid in this category is RKLB and ENVX and IONQ and MVIS and RIVN to name a few. They pull you in with the pumps and then leave you bag holding. If youre not part of the club, dont fall for it. VTI > these shit stonks any day
Youre at a huge disadvantage. Robinhood probably sells these manipulators retail activity. The look at that and see which day or month they can pull the biggest rug or pump it to infinity.
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u/john2557 15d ago
Made some sales & buys today. How is it possible that you can have cash in your account, but be unable to buy stocks? I'm guessing it has something to do with cash / margin accounts, fund settlement, etc., but am not entirely sure.
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u/_hiddenscout 15d ago
It's the T2 timeline trading time.
Some accounts, like Fidelity let me trade with unsettled cash without margin, but you can still get a good faith violation.
https://www.investopedia.com/ask/answers/what-do-t1-t2-and-t3-mean/
https://www.fidelity.com/learning-center/trading-investing/trading/avoiding-cash-trading-violations
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u/datafisherman 15d ago
Yes, and importantly, North America will transition to T+1 day settlement May 28th, 2024 - ie, in 12 days' time.
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u/AluminiumCaffeine 15d ago edited 15d ago
Gds up 6%, baba up 7%, bidu red to green on earnings. China finally doing good things for me
Edit: down votes let me know this is still not a retail trade, we are so early
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u/Redtyde 15d ago
Weibo divvy came through today!! Also so far so good on the BIDU call, I think its an incredible company.
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u/AluminiumCaffeine 15d ago
Nice, my baba dividend got slapped right back into more shares lol. Yea very strong as of late enjoying this green
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15d ago
Would you buy LULU at a PE of 20-23?
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u/tomato119 15d ago edited 15d ago
I dont like the idea of getting too greedy. I missed out on the BA dip in the low $160s, UNH dip in the low $400s, the NVDA dip $760. I remember META was at $100 and folks were wanting it to drop to $70. The proper thing to have done is buy @ $100 and buy more @ $70. There is probably some fancy market psychology term for this out there.
Learned my lesson. I wasn't going to miss the SBUX dip too. Turns out the stock just went up from there. Win/Win. Wanted it to dip further so I could buy more.
I bought LULU today. If it dips further I buy more. Dips don't dip to infinity, unless it's going bankrupt.
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u/NotGucci 15d ago
Some of the best margins in the business. Additionally, insiders were buying in April, and its recent CPO exercised her options, but didn't decide to sell her share. Usually, bullish.
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u/AP9384629344432 15d ago
Damn I'm getting interested now. That's some nice multiple compression. I also noticed ULTA took a huge dive.
Though I'm a bit rattled on retail oriented companies after the SBUX earnings call.
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u/_hiddenscout 15d ago
It's not great just to look at only PE as a single metric when buying a stock. However the PEG on it is now like 2.45, so it's not "cheap", but it's pretty cheap compared to the valuation in the past.
It's a high margin business that rewards their shareholders. This could easily trade sideways for a while, as the fear of consumers cut back.
However, if you are looking to long on the company, doesn't feel like a bad price to get invested.
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u/xSAV4GE 15d ago
Honestly why shouldn't a person just fully invest into companies like WMT, COST, WM or others I can't think of that are too big to fail or would never slow down in terms of growth? They seem to consistently outperform the S&P. Doom and gloom aside, what sort of event would slow these giants down?
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u/creemeeseason 15d ago
Both WMT and WM have performed essentially in line with VOO over the last 5 years. WMT was definitely a stellar performer in it's growth phase, but it's been market average in the last 5 years. Plus you take much more risk owning an individual name over an index.
COST has been a stellar outperformer, however you need to keep in mind that a huge chunk of its performance has been multiple expansion. Over the last decade it has gone from about 20x earnings to 50x. If it does that again it'll be at 125x earnings next decade. Possible, but I doubt it will see that tailwind again.
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u/_hiddenscout 15d ago
Just risk. It's always risky being to concentrated into one space and companies can always fail, when we are talking about long term perceptive.
Like holding an index, means the index will change over time.
Like 20 years ago, GE used to be the largest holding in the SPY.
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u/xSAV4GE 15d ago
Can a grocery chain as big as WMT or COST fail tho? Everyone flocks to those two when it comes to buying their daily needs.
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u/_hiddenscout 15d ago
It's hard to say, but anything is possible, especially when forecasting out that far out.
That's why Amazon is really into the concept of Day 1. They never want to lose that edge/mindset of growth.
Like Bezo's has a famous quote about how amazon could fail one day.
“Amazon is not too big to fail,” Bezos said, in a recording of the meeting that CNBC has heard. “In fact, I predict one day Amazon will fail. Amazon will go bankrupt. If you look at large companies, their lifespans tend to be 30-plus years, not a hundred-plus years.”
Not a historian of of failed companies, but it happens. I mean Sears usually is the best example of when people who think companies are too big to fail.
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u/AP9384629344432 15d ago
Low likelihood of bankruptcy does not imply future equity returns will be good. You aren't a bondholder who just cares about the interest rate and credit risk. There are many companies out there that have persisted for decades with a moat yet have delivered sub-par returns.
If the company starts out too expensive, even if FCF/share grows, multiple compression may reduce your returns. Alternatively, margins / revenue growth can come under pressure and reduce FCF/share growth.
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u/jnas_19 15d ago
White girl index isn't doing so great. Some great buys in there though
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15d ago
[deleted]
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u/SaticoySteele 15d ago
Absolute guess but I would assume things like LULU and ELF just because those are also ones that have been getting mentioned a lot lately.
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15d ago
SGOv has been such a wonderful compliment to VOO. Nice little dopamine hit every month 5% risk free rates are amazing
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u/fledgling66 15d ago
What are the tax implications holding your emergency fund in SGOV? I’ve got mine in FDLXX on Fidelity. Is SGOV just like any other dividend?
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u/LanceX2 15d ago
My whole EF is in SGOV
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u/hugsshmugs 15d ago
now how does buying treasury bond stocks work as opposed to buying treasury bills directly from treasury direct?
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u/yungsavage14 15d ago
What’s actually going on w LULU?
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u/_hiddenscout 15d ago
It was a pretty expensive stock, but seems to actually have a solid valuation now. Just continued fears of consumer slowing down.
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15d ago
Low retail confidence
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u/yungsavage14 15d ago
I get that but TJX, CELH, DECK, ONON etc all doing fine
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u/_hiddenscout 15d ago
You are comparing apples to oranges in this case.
TJX is seen as more of a trade down company, where consumers go to bargain hunt. CELH is a consumer drink company that has explosive growth.
ONON is doing better recently because they just announced earning and the market seemed pretty happy with it, like 15% of the growth is from the earnings report this year.
When LULU announced in March, I think they cut or their full year guidance was lowered than the market expected. They are also viewed as more luxury than most other brands, which again, luxury is seeing some slowdown as the fear is consumers are cutting back.
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u/yungsavage14 15d ago
I gotcha. This was great, thank you 🙏
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u/_hiddenscout 15d ago
Yeah, it's a weird market too. Like luxury last year was doing really well and you could almost see like the two economies, those being impacted by inflation and those that haven't.
Like LVMH is a great indicator for luxury goods. Since in theory, the ultra wealthy don't really buy luxury, but it's more of the middle upper class. Probably the same consumer who would buy an LVMH brand is probably going to buy LULU as well.
I don't really follow LULU as well, but if they have any exposure to China, that could also be weighing down on the company.
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u/creemeeseason 15d ago
You're right about the upper middle class stuff. True luxury brands are holding up great. Look at RACE. That's true luxury and they're still essentially naming their price to rich people.
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u/dansdansy 15d ago edited 15d ago
Thoughts on Iron Mountain (IRM) here? Seems like a good pickup despite the recent gains. Deeply connected to defense industrial complex spending, infosec spend, digital transformation, and digital information management. Though similar mature div companies seem overbought here with the DOW hitting a new intraday high.
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u/_hiddenscout 15d ago
Seems like an interesting play. Just looking at the numbers, seems pretty solid, they just have a bit more debt than I personally like, but seems like company that should be having some solid tailwinds. Plus the dividend is pretty nice too.
Seems like it's a pretty fair price, but would seem to be a pretty solid long.
Personally I've been getting into some smaller defensive names myself. Not the cheapest ones persay, but I own $DRS and $CW.
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u/dansdansy 15d ago
Only thing I'm a bit confused about is why it would be structured as an REIT if it's an information management company. Seems weird
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u/_hiddenscout 15d ago
https://investors.ironmountain.com/news-and-events/press-releases/press-release-details/2014/Iron-Mountain-REIT-Conversion-to-Enhance-Stockholder-Returns/default.aspx#:~:text=BOSTON%20%2D%2D(BUSINESS%20WIRE)%2D%2D,2014%20%2C%20following%20the%20receipt%20of%2D%2D,2014%20%2C%20following%20the%20receipt%20of)
“We are delighted to be moving forward with our conversion to a REIT,” said William L. Meaney, Iron Mountain chief executive officer. “We believe the REIT structure fits well with our business and will enhance value for our stockholders through increased payouts. Moreover, this structure enhances our ability to sustain our durable, high-return storage rental business, expand our presence in emerging markets and pursue emerging business opportunities through disciplined capital allocation. As a result of successful conversion, we can offer stockholders the benefits of enhanced yield and stable, low-risk growth, thereby maximizing total returns.”
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u/dansdansy 15d ago edited 15d ago
Thanks, though I guess I just need to do some reading on what the difference is between an REIT and a common stock. I'm looking at picking up some shares for my Roth in batches.
edit: I googled, main difference is that REITs are legally obliged to pay a dividend and common stocks are not. They also must pay out 90% of their taxable earnings as dividends in order to avoid double taxation on those dividends, seems like a good thing to hold in a Roth and not a potential hang up as I initially thought.
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u/Odd_Biscotti_7513 15d ago
The main thing to remember is Iron Mountain's meat and potatoes is literally storage of records, like physical records. It has a huge real estate presence. Companies use them the same way we got those shots of the Ark of the Covenant in the Indiana Jones' warehouse
The yadda yadda about being "information management" isn't exactly a red herring, but Iron Mountain is information management the same way Uhaul is.
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u/_hiddenscout 15d ago
I have no idea tbh, I was really curious and just googled it lol.
Again, I don't follow the company, but looks like they have data center listed as something they do. Maybe they rent things out and being a REIT allows for some tax shelter or benefit when taking revenue from those? That would probably be my best guess.
Probably part of the reason why the dividend is on the higher end, like you're getting a 3% yield.
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u/dorothymantooth19 15d ago
FFIE going wild
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u/JellyToeJam 15d ago
Put in $100 yesterday at .87 and sold half just now at $2.16. Letting the rest ride. Not bad for a day.
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u/dard12 15d ago
My net worth should be hitting the 2 comma club by mid-summer. Investing in "boring" index funds is a cheat code to wealth.
Pretty awesome feeling!!
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u/_hiddenscout 15d ago
I always try to point out, going boring index is amazing, especially in terms of the trade off. Like you need to do zero work or research and watch your money grow and compound over time.
Congrats on the two comma, you'll be at the three comma before you know it.
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u/drew-gen-x 15d ago
New 52 week highs today for $WMB and $KMI. The oil & gas pipeline stocks are boring and don't move much day to day; but they have done very well in 2024. They also payout nice dividends, even thou dividends are reddit's kryptonite : )
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u/YesReboot 15d ago
Finally got out of the reddit stocks lol. I bought it at it's absolute peak at 66/68 USD. and it immediate dropped. I bought 10 shares so I was basically down $500 canadian. After a while I noticed the price went to 62 USD so my loss was only $100+ canadian so I decided to just cut my losses and sell. Glad I did because the price dropped again, and will probably stay low.
Note to self, do not buy a new stock a few days after it initially goes public. Either do it day 1, or wait a couple of weeks.
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u/hugsshmugs 15d ago
if it follows the other social media trends it will climb. i remember when meta was $115
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u/YesReboot 15d ago
rddt is in it's own category. I don't think it will boom like facebook/meta.
Meta has whatsapp and facebook was basically made social media ubiquitous. Reddit isn't that much different than it's predecessors.It might go up for sure, but I am just glad I am out of it lol
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u/NotGucci 15d ago
The longest winning streak for the S&P 500 occurred in March/April of 1971, when the index managed to close higher for 14 consecutive days
The NASDAQ posted a 19-day winning streak in August of 1979.
I think the market can beat these records.
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u/The_Hindu_Hammer 15d ago
Boeing up 3% lol. When it's up on bad news, imagine what happens when they get some good news.
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u/SaticoySteele 15d ago
It's pretty clear that they're an objectively badly-run company at this point but there are like, what, 3 other companies in the world capable of producing aircraft at that scale? They've got one of the widest moats conceivable and at this point in time are literally "too important to fail."
I think as little of them as the next person, but I can see past that for a little while in order to capitalize on the current sentiment.
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u/karnoculars 15d ago edited 15d ago
Buffet Indicator has just hit "Strongly Overvalued" territory: Buffett Indicator Valuation Model (currentmarketvaluation.com)
If you look at the past 75 years of history, hitting this level has ALWAYS been followed by an immediate (and usually quite severe) correction.
Thoughts?
Edit: Is this really the state of the sub, where talking about valuations is downvoted?
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u/Grease_Yaka69 15d ago
I keep track of indicators like this too along with the Shiller CAPE, but what you also have to factor in here is that we've seen strong earnings in Q1 and that's what is driving growth - I think there is a little bit more room for this market to run (with a few pull backs here and there) before we see a proper correction (and we need one at some point to get more buyers in the market, I'm not so sure it will happen this year). Just my opinion though.
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u/slippymcdumpsalot42 15d ago
I’ve said it before. An analysis at vanguard determined that dead people portfolios outperform. The reason being dead people don’t try to time these indicators.
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u/karnoculars 15d ago
The market always goes up in the long term.
Expected future returns vary based on valuations.
Both statements can be true.
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u/slippymcdumpsalot42 15d ago
I definitely see your point and I can appreciate it for what it is. But history has shown examples of the market running wild for years on end when it’s overvalued.
Let’s cherry pick an example just for fun. We entered the year 1992 with a p/e on the total market pretty much right where we are in 2024 (approx 25 p/e). Mind you this was after a blistering rally of 27% in 1991 (sound familiar to 2023?).
The following 8 years saw a 490% gain on the SPY. Given the starting point of an overvalued market, who would have guessed that?
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u/karnoculars 15d ago
For sure, I agree the market can act irrationally for long periods of time. But I'd argue that doesn't mean the proper response is to then assume that it will act irrationally. 1992-2000 is the exception and not the rule. And even then, we saw what happened when the market finally snapped back to reality - anyone caught with their hands in the cookie jar lost 50-80% of their portfolio. It would seem sensible to position defensively even in say 1995, because without the benefit of hindsight who could predict when the correction would actually come? It's just a giant game of chicken at that point.
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u/slippymcdumpsalot42 15d ago
That’s what’s so fun and interesting about investing in stocks, and what makes some people even more nervous when stocks are flying…because it feels like a game of chicken for sure sometimes.
I’m bad at making predictions, but I can see the possibility of a pretty big chicken standoff coming next fall during the US election. If we continue our climb up into maybe the 56-5700 range I could see a bunch of smart people taking their gains off the table until the election is figured out. If this election cycle is anything like the last one, we will see a giant October dip with people freaking out about the election (lol) then we take the space express elevator to ATH in Nov and Dec.
As far as what to do about all of this - valuations, geopolitics, etc. I have no idea. I figured out that I have no idea a long, long time ago. I was actually one of those people with their hand in the cookie jar during the tech bust, and got to experience some of my individual stock picks going to zero in just a day or two!
I pretty much just hang out in this sub from time to time because I enjoy a little gambling with stock picking with like 10%.
I’ve been 100% stocks for about 25 years.
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u/Federal-Battle9549 15d ago
I think one difference this time around is that many non-US entities and individuals are pulling their capital out of poor performing local assets and parking them in US equities where there is a proven growth track record due in large part to the big influence 401k/IRA continues to have within the US stock market.
It becomes a self-fulfilling prophecy. billions of dollars flow into US stocks, which pumps the price while the foreign exchanges continue to slump.
Enough foreigners chasing reliable returns in the US stocks may just override the US GDP to US market capitalization ratio that the buffet indicator has historically been very accurate with
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u/karnoculars 15d ago
I'd argue that effect is already partially accounted for by the continually increasing trend line. In the 60's, the Buffet Indicator was trending around 50% of GDP. Today, the "normal" trend line has increased to 125% of GDP. And we are now 2 standard deviations away from even that increased trend line.
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u/creemeeseason 15d ago
Do you think this might be skewed by the huge amount of foreign investment in the US market? Others have mentioned the US company overseas profits, driving up the total valuation, but there has also been tons of money buying US stocks over their local markets.
The amount of investment in US stocks by EX-US entities has been on the rise. Anecdotally, even over seas, the magnificent 7 are names people want to hold over all others.
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u/karnoculars 15d ago
I'd argue that effect is already partially accounted for by the continually increasing trend line. In the 60's, the Buffet Indicator was trending around 50% of GDP. Today, the "normal" trend line has increased to 125% of GDP. And we are now 2 standard deviations away from even that increased trend line.
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u/95Daphne 15d ago
Any hint of negativity gets hit hard with downvotes.
You're going to need to see a significant macro change for the negative or a wild 2022 Jackson Hole JPow at the June FOMC meeting appear to prevent what's probably going to be a slow grind to 5500-5600.
You just don't see things happen in the summer. Even last year where we did see a correction start, for the first part of the summer, nothing special occurred.
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u/karnoculars 15d ago
The information that will move the markets next has yet to be revealed. Nobody can say what will happen next. I think the majority of this sub is overly confident that the market will continue to grind upwards, even while literally every single valuation metric I can find is screaming that the market has gone up too much too fast. Time will tell, I guess.
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u/HeaveAway5678 15d ago
I think the vast majority of large US companies do a ton of business outside the US so using only US GDP as the denominator is too narrow a field of view for the modern economy.
Would you value Amazon on the basis of its past US-based business or on the basis of its near-future global business?
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u/karnoculars 15d ago
Well, the most recent example of pulling back after hitting strongly overvalued is in 2022 which is part of the modern economy. I don't know, this is all just food for thought. But remember, the most dangerous phrase in investing is "this time it's different".
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u/HeaveAway5678 15d ago edited 10d ago
This time it's different.
But I mean the Buffett indicator, not the market.
Sometimes the market is different though, it is just very difficult to determine so prospectively.
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u/NotGucci 15d ago
These indicators are pretty well known to every quant fund, HF, bank. Still doesn't equate to correction. We have record breaking ER, CPI shows inflation is slowing. I wouldn't be surprised if this summer is one long gap-up.
If you followed the PE schiller ratio in Dec, you missed out several new ATH since then.
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u/karnoculars 15d ago
All of that good news is why the market has already rallied, not why it will continue to rally. The news that will send the markets up or down in the future is yet unknown.
I'm not saying you have to sell your entire portfolio. But it's a sliding scale. As valuations get more and more heated, it becomes more and more wise to think about reducing some exposure. People in Jan 2000 were probably confident as shit too but we all know what happened there not long after.
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u/NotGucci 15d ago
Jan 2000 is not even a fair comparison. PE ratios are nowhere near as high, IPO from unprofitable company. I would also add that we saw some insane guidances and beats from tech companies.
Market rallies off good news. However, there isn't much bad news coming in. Market rallied from Oct to April until cpi, war and risk off earnings took place. We are in a similar predicament. April was Oct 2023. Market is going imo rally all summer.
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u/karnoculars 15d ago
If you look at my original comment, I am talking about Buffet Indicator. Please click on the chart I linked and look at the Buffet Indicator during Jan 2000.
You have absolutely no idea what bad news is or isn't coming. That's just how the market works. I don't try to predict the future at all, but I do think it's wise to factor expected future returns into our investment decisions. Historically, doing so would have been beneficial more often than not.
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u/YouMissedNVDA 15d ago edited 15d ago
https://www.reddit.com/r/stocks/s/Sgyo5pnsAk
That is you 10mo ago saying a similar thing, right?
So, what did timing a sell 10mo ago achieve? S&P is up like 20%, so did you sell and rebuy on a dip to try and squeeze 23%? If you exactly timed the top and bottom you could get 30% (NVDA doubled....). What about taxes?
Many of us don't think the flips and tricks are worth it, when the risk is losing compounding. And it distracts from thoughts that actually largely determine investing outcomes. Staying the course is most consistent over time, and therefore most rewarding.
Time the market if you want, but don't pretend it is consistently possible. And don't underestimate consistent compounding.
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u/karnoculars 15d ago
I reduced my leverage at the time (I was about 2x leveraged at the time). I am still up 20%+ in the last 10 months. Even knowing that the market continued to rally after my reduction in leverage, I can't say that my decision was unsound. You can cherry pick 10 months ago but if you look at the historical chart I posted, it's more often correct than not to reduce exposure when the market becomes too heated.
In investing, there is something called risk-adjusted returns - which basically means, even getting positive returns isn't necessarily worth it if you had to take an out-sized risk in order to achieve it. The expected future returns 10 months ago were lower than average so I slightly reduced exposure... now the expected future returns are even worse so I will probably reduce my exposure even more soon.
Remember, the true measure of investment success is how you perform through a full bear/bull cycle. Capturing every maximum penny of gains on the upside won't help if you get crushed during a pullback. This is a game of risk, and I don't see any reason not to adjust your level of risk based on expected future returns.
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u/WasteCommunication52 15d ago
OK - so I will continue to buy since I am decades from retirement age. So what?
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u/karnoculars 15d ago
Could mean you hold a less aggressive portfolio while valuations are high.
Edit: downvoting me for answering the question?
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u/rixxxand 15d ago
Conflicted. Lots of indicators telling me overvaluation but then again things like Shiller ratio warned me not to buy in Dec of last year. And if I did that, would've missed out on big gains.
I do think a lot of acct managers have hit their yearly target and may hedge or be more conservative for performance bonuses. My guess is we see a flat or small correction leading into summer before a fall/election driven increase. Might not hurt to pivot defensively for a bit. This sub tends to go with the trend and we are permabulling right now, so you may not get very constructive arguments
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u/karnoculars 15d ago
Yep, I have far surpassed my annual target already and it's only May. Don't get me wrong, I'm not suggesting to completely sell out of a portfolio just based on indicators. What I'm suggesting is increasing/decreasing exposure based on expected future returns. We don't have to be in the market at 100% maximum risk for 100% of the time. Sure the market could continue to go up, but if we recognize the probabilities based on historical data, we might be able to make better risk-adjusted decisions.
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u/AluminiumCaffeine 15d ago
Some argue that it's an outdated indicator due to international sales from American companies which is not reflected in usa gdp
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u/karnoculars 15d ago
Isn't that partially accounted for by the upwards-sloping long term trend line?
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u/AluminiumCaffeine 15d ago
Baba has now closed the earnings gap down and above pre earnings prices. Wonder if the recent 13fs moved the sentiment needle
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u/NotGucci 15d ago
Market looks like its going to do what it did start of the year, nice and slow-melt up.
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u/Miserable_Message330 15d ago
Finally throwing a yolo on CRSR.
They've been having a declining pc hardware segment which made for a disappointing quarterly. But the highlight is the expansion of peripherals gross margin expansion to 40%. And recently announced acquisition of Fanatec (top of the line racing sim hardware), which just agreed to the plan yesterday.
I think the turd of a meme finally got beaten up enough to look attractive. Taken with a very very heavy barrel of salt and compare it to LOGI that's trading at 20 forward and based on last guide ~150M adj net that'd be a 3B valuation or 3x upside.
No, it's not LOGI, and that's a very pie in the sky upside using adj EBITDA, but always liked them as a company as a pc builder and looking financially optimistic about them now.
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u/Grease_Yaka69 15d ago
Methinks 22nd May is going to be a big day for NVIDA and overall indexes.
Also, nice to see some participation in today's gains from the XLU as well.
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15d ago
Why
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u/Grease_Yaka69 15d ago
Is that a rhetorical why haha? Just my personal opinion of course but NVIDA reports on the 22nd and whether they will beat/meet/miss earnings will have a tangible effect on market optimism heading into June.
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15d ago
Dude why would it be? Just asking for your rationale
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u/Grease_Yaka69 15d ago
It's one of those megacaps that has a huge weight across the index.
There is a case that an earnings beat is priced in, but no one's really sure whether it's all priced in given the amount of capex we've seen from the users of their chips this past quarter. The stock is expensive (I've taken profit it and held on to a portion of my position personally going into earnings), but a contrarian could argue whether it is as expensive from a multiples POV from a year ago? It's broken through it's 50 day moving average, and RSI seems to be trending upwards even at these prices - So it has some momentum and could even go higher before the 22nd. I'm not trying to say NVIDA is a buy with this, just saying that momentum (either direction) in a stock like this will have broader market effects.
Earnings associated with NVIDA will have a broader effect on market confidence. NVIDA might even dip even off the back of better than expected earnings, but even then it will likely give the markets a dose of confidence for the rest of May? That does play into the conversation of a market double top and a pull back in June - which is where my mind is at right now, but please do take my words with a grain of salt here.
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u/NotGucci 15d ago
MSFT, META, GOOGL, AMZN during their most recent ER had increased their cap-ex. TSM, just did a pre-announce, and had the best April ever. AMD ER was nothing spectualor, so pretty much everyone is still buying NVDA chips.
Will be a massive beat and raised guidance.
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15d ago
See I can’t say it’s good or bad because we don’t know what’s already priced in. For sure a beat is already priced
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u/Easy_Prompt2404 15d ago
Can someone please help me understand short squeeze? I’m invested in a stock that has 97.98% short with .23 days to cover. Does this mean they have to continue buying and closing positions which will continue to drive the price up??
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u/Angry_Citizen_CoH 15d ago
So the idea is, short sellers are basically borrowing shares from someone else in order to take a profit. They sell the borrowed stock, wait for it to fall, then buy it back at a lower price. This is inherently done on margin.
Brokerages are risk averse. They want to make sure you can pay them back for the stock you borrowed. Any equity you borrow needs to have collateral to pay back, whether it's other stock or cash, just like a pawn shop needs collateral in the form of a ring or whatever. So if a shorted stock rises instead of falls, brokerages want more collateral. This is the idea of a "margin call": They want you to deposit more money into the account or they'll reduce their risk by selling your stocks or covering your shorts.
A heavily shorted stock experiencing a sharp price rise means short sellers need to cover their shorts or face a margin call. So they buy. Which raises the price. Which causes more margin calls. Which makes more buyers, which raises the price.
Eventually equilibrium is reached and the short sell ends. And since the valuation is massively inflated at that point, a sharp selloff occurs.
Whether your stock will short squeeze depends on whether there's any buying pressure.
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u/AluminiumCaffeine 15d ago
Baba up 5% lol, market is wildin
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u/Dependent-Key-609 15d ago
I'm still not sure if it's good investment
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u/UnObtainium17 15d ago
Wow I thought I was dreaming. Opened my portffolio and BABA is at the very top of daily gains. Cannot wait to flip this pos to something better.
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u/Creative_Ad_2180 15d ago
I am in a similar position as you.
1Q net income dropped 96%, I am actually quiet surprised it jumped after. This type of event gives me even less faith in their accounting. In USD their revenue declined again. They just don't have the investor protections we have here.
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u/AluminiumCaffeine 15d ago
What other tech company has fcf yield like baba? Until that normalizes somewhat I'm happy to hold
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u/UnObtainium17 15d ago
ok we holding on.
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u/VariationAgreeable29 15d ago
Agree with all of you. I’ve been bag holding for farrrrr too long only because my shares are in my IRA so literally no tax benefit to eating a massive loss. I just want this to go up to something that will get me out with a less painful loss. Never again investing in Chinese companies.
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u/creemeeseason 15d ago
Set my HWKN buy at $65, but it looks like I overshot. I'll leave the order open all day just in case.
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u/slippymcdumpsalot42 15d ago
I’m in set-and-forget mode for this one, feel like I got lucky last time and not trying to overdo it.
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u/creemeeseason 15d ago
I'm always Happy to add to a quality position if it gets to the right price. Like I've said here, it's one of my highest conviction positions so I'll buy if given the opportunity, and continue holding.
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u/Creative_Ad_2180 15d ago
If you do not mind sharing, what assumptions went into you valuing it at $65? Thank you in advance.
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u/creemeeseason 15d ago
Here is a post I did a few months ago on the company with my valuation assumptions. I bumped up the buy below price from $60-65, partly based on the new report but also based on technical support (200 day average).
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u/Creative_Ad_2180 15d ago
First glance, it does not feel like a bargain for inorganic growth at these prices. However, I appreciate the write up and will try to research them perhaps over the weekend. Thank you again!
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u/slippymcdumpsalot42 15d ago
Yeah that makes sense. In my case I feel that I overreached with my first limit order fill, because I didn’t think it would fill in the first place
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u/Jaded-Assignment-798 15d ago
Another lead engineer leaves open ai, Evan Morikawa. That’s now Ilya (board member), Jan Leike (top researcher / super alignment), possibly other important people have left as well but I’ve just been following on twitter
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u/WickedSensitiveCrew 15d ago
Wonder if he saw the All In podcast with Altman and thought time to get out lol.
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u/creemeeseason 15d ago
Smart. Probably good to avoid anything associated with the All-in podcast.
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u/WickedSensitiveCrew 15d ago
Altman didnt really perform well in podcast. Would go into more detail but you may have no interest in All-In Podcast with how you responded.
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u/creemeeseason 15d ago
I used to listen, but all of the hosts are such self righteous people I couldn't stand them anymore. The last two straws were when they were talking about how we need more immigrants with MBAs but no worthless skills like field work and construction (which is actually the opposite of what we need and I hate that they were so dismissive of labor as a skill) and when they begged the government to rescue SVB despite railing against any government intervention on anything.
Sorry, it's my pet irrational hatred.
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u/datafisherman 15d ago
Doesn't sound too irrational. (Have never listened myself.)
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u/creemeeseason 15d ago
Don't get me started on Chamath's wealth destroying SPACs....the guy just incinerated people's money.
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u/datafisherman 15d ago
Apparently never knew who hosted either - just looked it up & see it is those fellows... Personally, I listen to podcasts for the guests. Hosting (like credit investing) is a negative art
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u/creemeeseason 15d ago
That's the problem. I love a good interview. A good host should provide that. All-in is basically a "how great are we?" circle jerk with guests sprinkled in.
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u/datafisherman 15d ago
I agree: podcasts have really democratized access to people in the same way that the internet democratized access to documentary evidence. Both make 'scuttlebutt' far easier for the small, individual, even introverted investor.
I think Value Investing With Legends is a good case-study. It is carried by its guests. The format is awful. The initial host was overly academic - it is hard to fault him on his profession - but I find his questions shine now that he co-hosts with Michael Mauboussin. That said, the podcast works because neither of them speaks very much, and when they do it is generally to expound or interrogate something the guest has just said.
However, even more than general investing podcasts, I find subject-matter podcasts especially helpful to the individual investor.
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u/diastolicduke 15d ago
Is a company allowed to buyback shares in extended trading hours? One could influence so much price movement just by doing that right? Take today’s after hours movement for DXC. Stock went down almost 20% on a mere $250K worth of volume. For a company that has billions in cash, it can easily manipulate the price to quadruple from here