OT? A bit of contrarian heresy

Investment Analysis Clubs Saul’s Investing Discussions
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OK, first of all I want to thank Saul, as well as the large number of contributors here for ferreting out wonderful companies which allow us to make bucks faster than alternatives.

My personal investing philosophy has generally been a combination of LTBAH and trading. When trading, timing is everything (doesn’t make much sense to buy high and sell low).

On August 30th I posted the following on METAR (because I was embarrassed to put it here) and caught flack there as well:
https://discussion.fool.com/my-current-thoughts-on-the-stock-mar…

What’s bothering me about the SAAS stocks is not that they aren’t great companies, but rather, the present value of the price has to somehow relate to a rational expectation of growth in assets and earnings past a year or two into the future. As they increase in price “in the current” that determination becomes more probibalistly difficult.

I am fully intending to repurchase the portfolio in the near future (I sold all the high-growth stocks except ROKU (and picked up some ESTC a few days ago - temptations will always get me into trouble:-), but for now, I’ve battened the hatches and am willing to watch the storm through a window.

The above has nothing to do with the quality of the companies, but rather the current value of the companies.

I am not advocating this strategy for anyone, but just describing how I’m skinning cats.

Jeff

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Translation: as you guys are feeling pain, I am not, because I consider valuation. I will ride out the drop, buy back in at the bottom and ride it back to make my fortune with less risk.

Got it. Thanks, Jeff.

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This thread has no more relevancy now than when you held off posting here a few days ago. If this is the kind of stuff Saul is preventing I can appreciate why he’s so strict about what’s ot.

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I consider valuation. I will ride out the drop, buy back in at the bottom and ride it back to make my fortune with less risk.

Got it. Thanks, Jeff.

Isn’t that the entire goal of investing? To sell what you perceive as overvalued stocks and buy good names after they fall [which they always do even if it’s just the market overall]? It’s not an impossible task.

I seem to remember Saul saying he lost 68% or whatever the exact figure was back in 2008. It’s better to avoid those losses from where I sit. I was down 20% in 2008, not bragging on that, but I did manage to start re-buying equities in March 2009, 2 days after the low.

Valuation always matters. In the long-run, anyway.

Naj,

long ADBE, OKTA, TWLO, CRM, MTCH

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I can only speak for myself, but I come here for confirmation bias and to rationalize my investing behavior. As such, I consider OP off topic and harmful to my mental health. Please place a trigger warning on negative biased posts regarding tech and SaaS stocks.

Now, someone please talk me off the ledge quickly before I take a huge tax hit by panic selling my YTD 40% gains.

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“Isn’t that the entire goal of investing? To sell what you perceive as overvalued stocks and buy good names after they fall [which they always do even if it’s just the market overall]? It’s not an impossible task.”

“Valuation always matters. In the long-run, anyway.”

Agreed.
It has gotten to a point where I can barely post on this board, because I want to consider a realistic CAGR for any stock I buy, at the price (and mkt cap) it is when I buy it. Because I (duh) want it to go up.

To just blindly say “invest in great companies” and not consider valuation is just absurd and irresponsible, imo. It smacks of Gorilla Game mentality when JNPR was a $70b mkt cap, when CSCO was $500b, and when a company most have never heard of (RBAK) was a $20b mkt cap because it kinda/sorta looked like JNPR and CSCO.

2018 saw massive multiple expansion thru Sept 2018, then crashed to Dec 2018 as most remember well.
All Jan and Feb 2019 gains were, imo, just retracing back those late 2018 losses.
Around Feb/March of this year we started seeing multiples crank it up another notch. A 30 P/S became the new 20.
Then 2019 SaaS IPO madness kicked in with absurd valuations for ZM and CRWD and WORK, etc…

I love AYX, and had great gains this year on and off with it. But I got really lucky by selling out last week when I noticed it had surpassed even ZS in P/S and was in the 30 range, after having been about 20 when it first changed to ASC606 accounting rules. It was a great company then, and a great company now, so where is the justification for multiple expansion from 20 to 30 in a few months? Answer: there isn’t.

Just as there isn’t justification, imo, for a video conferencing app, regardless of growth rate, to be viewed as a buy when it is already a $25b mkt cap.

Valuation does matter, and I don’t know why there can’t be a honest discussion of valuation/multiple when determining if a company should be a buy or not.

Otherwise this is just playing momentum.

Sure it stinks that my favorite, TTD, is getting crushed today, too.
But it is hypocritical of me to complain, when my previous modeling just a few months back kinda hinted that it probably only had so much upside left this year.

Maybe we should start expecting stock prices to not grow faster than growth rates, for a change.
If at a fair price, then appreciation should equal growth rate. If already too expensive, then appreciation should be less than growth rate. I am really that crazy to think this?

Call this OT. Ask for it to be deleted. Not my board, so all good with whatever is decided.

Dreamer

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There is nobody out there that can magically Time their buys to sell stocks when they are overvalued then magically buy them back in at lower prices when they are undervalued.

That’s what the OP is proposing to do.

These sane people who cone out of the woodwork when stocks are down will conveniently forget to mention the times they sold and the stocks kept going up.

Which is why I think coming here gloating about your perfect timing this time around is OT.

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There is nobody out there that can magically Time their buys to sell stocks when they are overvalued then magically buy them back in at lower prices when they are undervalued.

What if they’d actually sat down and figured out a way to gasp value the company?

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“What if they’d actually sat down and figured out a way to gasp value the company?”

There is already a method. A company is worth the net present value of all future earnings. But good luck a) getting that calculation right and b) getting the market to conform to it.

We see it all in this thread alone. Everybody is convinced in their own method. Sone people are worried about price increase potential over the next two months based on multiple expansion, I’m in the position that’s not the way to approach it.

There is no magical formula to tell where stocks are going to go where you can routinely sell at the top and buy lower. Obviously if there is, it’s a closely guarded secret and not going to be shared publicly. But there’s not.

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OK, first of all I wasn’t gloating. I originally avoided posting here that I was picking up my chips, and nearly didn’t this time as well. On the other hand, it would be a dis-service to some who might think that, because of the cheerleading that takes place here, that there aren’t options other than always buying the dips.

I’m not always right (and have plenty of scars to prove it), but (forgetting about the valuation issue, important as that is) I have found over the years that when 100% of everybody is in agreement concerning the stock market and the “game” is no longer closely held, it’s time to step back for a while.

What goes down will likely come back up and, successful or not, I’m going to try to catch the updraft, but to avoid selling because I’m “abandoning the cause” is pretty silly. If it is the case that stock prices go down because more shares are offered for sale than buying, then I’m apparently not alone (just the only one being vocal).

Good, bad or ugly, I’ll pay my taxes and tomorrow (and the next day and the next day) will be the beginning of the rest of my life and all decisions will be new and fresh.

If only positive opinions are on-topic, then this one regarding whether to hold or fold and coming up tails is off topic. If opinions about how to make money utilizing these stocks is on-topic, maybe this one is. That’s why the question mark in the topic.

Jeff

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If only positive opinions are on-topic, then this one regarding whether to hold or fold and coming up tails is off topic.

Market timing IS off-topic for our board. That’s not what this board is about.
Saul

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Ormontus,

Please be sure to let us know when you are buy so we can all benefit from that wisdom, too.

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Torquepeak,

Only because you asked so specifically (and I won’t be repeating every time I make an addition), for better or worse, I picked up a double dose of ZS this morning.

We’ll see what sort of dose I’ve contracted :slight_smile:

Jeff

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