Catching up on a few posts here and watching earnings season and had this thought so I figured I’d post here in case people find value in it.
As earnings season has gotten into gear, the market now feels like a “show me the money” market more than ever before. The indices have been bouncing around in a range for months, as individual stocks are out or under performing.
This earnings season is interesting as the expectations for it have come down record amounts from what there were a few months ago. Now, I don’t place much value on analysts, but its a data point, so take it for what its worth. With these lowered expectations you’d expect more earnings beats, but also we are seeing a lot of sell offs. The growth story just isn’t doing it alone anymore and it seems that the market really wants to see profits and EPS along with the growth.
Look at TWTR, LNKD, YELP for example. All crushed as the story wasn’t enough to keep them up. Even stocks like UA and BWLD or GOOGL & FB took a hit as they were a bit ahead of themselves and don’t seem to be showing enough growth and profits combined for the market.
Stocks like AMZN & NFLX rocketed, but the former has given a chunk back too. Long term I think these companies will continue to succeed, and they will continue to disrupt and create revenue streams that help justify their valuation, but right now, they look too pricey to buy into for me.
The nice thing is that companies like SKX, BOFI, SWKS, GILD, CELG, etc are posting both growth and revenue, (though the mkt wasn’t nice to CELG today, but biotech as a sector also has been a bit overextended too) and I have to hand it to Saul for doing a great job with his analysis and choices. The 1 yr PEG analysis is very helpful in this market, in fact that got me to trade some ELLI for CRTO. Turns out ELLI posted good earnings anyway, but it feels quite ahead of itself for me as well.
In the middle, there are companies like GPRO, they showed money and growth, but are a bit pricey for it. On the other side you have SHAK, whose valuation baffles me at this moment. I think it only goes up because people who like the burgers want to won it.
I’m curious to watch TSLA, they announce a battery thing or whatever tonight, and have ER next week. I stand by my statement that they are not a car company and should not be valued as one. They are a tech company, they are producing battery technology, they have their own supply chain software, and I would not be surprised of they are developing AI for self driving cars to license to other companies in the future, but it should be fun to watch as I don’t think any of these can show enough money yet to the street for it to be treated well.
Just some random ramblings. Most of my core holding have done quite well. Some longer term winners have given a little back and I’m ok with that for now. And there are a lot out there that are fun to watch and can provide some good short term trades if that is your style.
But ultimately, in these market conditions when I am watching earnings and looking for places for new capital, especially here at all time highs, the focus of the moment seems to be “show me the money” if you want a good company for a long term investment. Also, the ones that don’t show enough are the best candidates for sale. Just gotta watch the tax max on them too.
I know my opinions and style don’t always agree with everyone here, but much of my core holdings do fit this quite a bit and I appreciate the commentary people share.