As more they fall as more seriously I am thinking of buying this bouquet of fallen flowers, expecting their stock price to halfway blossom again when the current darkness subsides and the sun shines again, as I am having a hard time to imagine life without them (easy for me without Meta, but the rest of the world seems to depend on it while condemning it).
As others seem not to be interested, I am wondering what I am missing?
PYPL has plenty of competition and also exposure to the crypto implosion. So I watch it but have not yet been inspired to buy.
META is of no interest to me, for a number of reasons. To my eye, about 90% of the advertisers on FB are small businesses offering overpriced junk.
I recently bot AMZN and may buy more. Iāve recently noted EBAY as an attractive, if boring, investment. But I await at least the upcoming Fed meeting outcome before buying much of anything. I remain more than 40% in cash and another 20% in short-term CDs and Treasuries.
MisterFungi, thanks for your comments.
And wow, I thought my 30% cash were a lot.
Take a look at SPOT, SHOPify, TWLO
Hi MisterFungi,
Thanks for your thoughts. Is the 40% cash something that was accumulated from selling/ liquidating some of your holdings recently? Or is the cash cushion normally something that you hold in high percentage, awaiting for buying good companies only at the fair price based on valuation (btw, I greatly admire your intuition to be on the sidelines with cashā¦It was only a couple of years ago that I used to be always in cash and not care a dime on what the market was doingā¦let alone individual stocksā¦but what a journey the 2021-2022 has been for meā¦would have loved to be in a similar position of strength at this time, but hopefully I have learnt my lesson and have a second chance!)
Charlie
Hi Kingran,
Thanks for that. How do you value these 3 companies? I find SPOT and TWLO are not yet profitable, and much to my chagrin, SHOP, which I hold in large amounts (of course with a greater than 70% loss) has a P/E which is apparently too high?
And I was intrigued to see that CFRA has TWLO a 5 star buy, but then bizarrely says its fair value is in the 40s!!
I am not questioning your buys, but would love to learn why you rate them as possible buys.
Thanks
Charlie
They are pretty different animals.
Some reported forward P/E ratios, your list and a few of randomly selected others
ebay 10.95
amzn 69.93
pypl 18.90
meta 14.29
intc 10.58
ko 25.51
bac 9.73
baba 13.77
bfh 3.33
gm 4.64
You get different results looking out more than one year, but the same general trend.
Iām not saying this is a valid metric of how cheap/expensive they are.
Thatās because itās longer term earning power that matters, not short term.
But itās an interesting and pretty valid metric of how much hope is embedded in the price of each one right now.
In effect, the market is assuming that Ebayās earnings per share will never rise again, but that Amazonās will rise strongly.
That may well be right.
If you agree with those relative conclusions, there is nothing interesting to see.
But if you donāt think the multiples are in proportion to their āpretty darned sureā earnings power
share in a few years, itās not hard to think of which ones might be buys and which ones to pass on.
Again, Iām definitely not saying Amazon is expensive and Ebay is cheap. Or the reverse.
It depends on your outlook for the underlying businesses on a per share basis, adjusted for dilution and time value.
Opportunities arise not when expectations are high, nor when multiples are low, but when your opinion (assuming itās well thought out) differs from that of Mr Market.
Jim
I am not questioning your buys, but would love to learn why you rate them as possible buys.
They are suggestions and one has to make a determination what fits for them. I have some puts sold on those names at even further lower price and donāt own them.
Now SPOT, 2xsales, they can grow 15% for the next 7 to 10 years. I know company has guided higher. Forget everything, if they can bring down SGA by 4% to 5% of revenue, that falls into profit. They can do easily 5% to 7% net profit on revenue and they can get to 10% as outside chance.
Another way of looking at is, revenue per user and track the user growth and see where they are with the total addressable market or users, and of course upside on the advertising.
Do you think the price is reflecting all of that, may be, may be not. You have to factor multiple scenarios playing out and assigning some percentage to see the range of EPS and price. Now, you need margin of safety, a price where most scenarios you make money and on worst case scenario you could get out with minimal loss.
Thatās where buying at right price matters. Look at my Citibank notes, I am not expecting Citi to suddenly become super profitable, but perform better than the pessimism baked into the price. They are almost 50% of Tangible Book value, if they can show life, continue to fog the mirror, they can get to 1x BV. On the other hand some of these names has to perform and slightly exceed the expectation baked in.
Lastly, the reason you are constantly looking at all these companies is not to buy NOW, but you develop understanding and a mental model when you can, and when the panic arrives or price declines you are better prepared and not discouraged by the price decline. Also, you are not buying them with an expectation they are going to have a V shape recovery to their 2021 highās, rather you buy for multiple years of growth.
AMZN earned 3.24 / share in 2021, so at $110 that is a ātrailingā PE of 34. My central estimate is that revenues will grow at 8% - 12% and margins will improve slightly (from 2021 levels). So I am bullish on AMZN even at current prices.
tecmo
ā¦
Is the 40% cash something that was accumulated from selling/ liquidating some of your holdings recently? Or is the cash cushion normally something that you hold in high percentage, awaiting for buying good companies only at the fair price based on valuation?
Itās the result of a mix of things. I buy based on valuation, and bargains have been hard to find in the (recently ended?) era of free money. I sell mostly when I conclude Iāve made a mistake or (occasionally) when the price of a stock I own suddenly overshoots materially my sense of its fair value. More often than not, those latter stocks continue on even higher.
I also admit to selling a handful of times in the past 30 years based on fundamental changes in macroconditions as I see them. So I bailed when things were going nuts in the dot-com era, when the liar-loan/MBS/shadow bank stuff went bananas back in '08, when a recent President looked to be pushing the US into an existential crisis, and as the Covid pandemic appeared to threaten human civilization. In such situations, Iād rather be wrong than late. Bear in mind, Iām old and I grew up impoverished, so Iām generally risk averse on financial matters.
when the liar-loan/MBS/shadow bank stuff went bananas back in '08
Actually, more like second half of '07.
Thanks Misterfungi and Kingran.
Charlie
All the puts I have sold on these names have expired. I wanted to pull the trigger on SPOT and for some reason anchored on $60 price 
| July 12 | 2/16/2023 | 219 | |
|---|---|---|---|
| SHOP | 32.38 | 44.05 | 36.04% |
| SPOT | 99.58 | 124.47 | 24.99% |
| TWLO | 83.51 | 75.45 | -9.65% |
Without bothering with P/E or other metrics (others have already covered) Iāll just note that I donāt see a lot of growth for eBay. It is what it is, Facebook marketplace offers a near identical service without transaction costs, and eBay isnāt big enough to bolt on the kinds of things Amazon has (cloud, logistics, distribution) and heck, even PayPal has gone itās own way. I could be missing something, but if so itās not obvious to me.
Amazon has been creative, is increasing business regularly, including its āadvertisingā now growing 18% a year. A large logistics acquisition would grow things although thatās capital intensive and pretty low margin, so that would be a surprise. Their āfranchiseā approach might relieve them of the capital costs (after getting it started), so maybe, but Iād sure put AMZN well ahead of eBay for future prospects.
Meta now grosses more than all four major television networks combined, and they do it with hinkey little companies hawking tools from China and clothes from Indonesia. If they ever convince the big-boys of advertising (P&G, etc) to move over in a big way they could be an absolute cash machine. Of course youād have to yank Zuck out from under his goofy headset to do it, but it could be done. One of the biggest ad categories anywhere today is prescription drugs, which I never see on social media. Iām sure there are privacy issues, but if they can afford prime time TV they can afford FB and others on a spray-and-pray basis too.
Last, PayPal has critical mass, but seems unlikely to catapult to MC or V status, I donāt know what the roadblocks are, but thereās a ton of upside potential, and yes, a few challengers who face the same issue with PayPal that PayPal does with the next tier up.
In order of preference, at least for me, would be FB, AMZN, PYPL, and EBAY. Of course I hate Zuck so I took my profits and ran, but thatās just me 
AMZN is a now bigger than FedEx and UPS. And they have invested heavily and build their own logistics.
Well sure, but strip out the retail, advertising, cloud and other parts, how big is their logistics one-on-one? It might be that it would be worthwhile, but the cloud came almost free as a requirement of the online (starting using spare capacity off season), and advertising is free (simple add on to product listings). Most of their hard investment has been going into warehousing; presumably that ends sometime and they ramp up the distribution. (I know theyāve been growing that crazy fast, too.) Still, thatās a low margin play compared to cloud & advertising.
Advertisement is something like 90% gross margin and straight drop to bottom line. AWS is not. Amazon has 32 regions, and each region has at least 3 data centers. Each DC costs anywhere from $500 Million to $1 Billion. Then there POPās and their fiber network, etcā¦ they have invested north of $75 B in infrastructure alone on that business and then the investment in developing software etc. Of course the business is high margin and pretty much the money invested are the money they earnedā¦ still it is not free or the excess capacity of Amazon.com. AWS origin was amazon.com requirements, but they consciously made a decision to build AWS features for the marketplace not for amazon.com requirements.
Now it is almost 5xsales.
Note to self: When you think something is cheap, just open a position.
mungofitch - 7/28/2014
AWS is the top dog in cloud computing. Imagine what would be its value?
I imagine it could be sold to a very high price today.
I imagine its value is very much lower based on the present value of all the net return on capital invested that it will achieve between now and the day that they close shop.
Probably something modest, but I would not completely rule out values of zero or less. Letās seeā¦a hugely capital and energy intensive cutthroat-competitive business, by definition supplying a commodity service, with several very deep-pocketed desperate competitors not worried about making a profit any time soon,and massive reputation risk on the first inevitable big data breach boondoggle?
Sign me upā¦not.
10 Years and still wrong on Amazon. Everybody gets things wrong, but continuing to stay wrongā¦
PS: 10 year back the same 2Q earnings spooked investors, started then discussion about how AMZN is worth zero or less 
Instead of mocking Mungofitch on a board he is not, wouldnāt be the decent doing that on shrewdm.comās Berkshire board where he actually is (as you know perfectly well)?
Doing it here instead says more about you than him.