Your humble resident Monkey usually sticks to thinking about long-term business fundamentals and lets the stock prices go where they must in the short term and worrying not.
But our current quagmire makes portfolio reconstruction seem like a good idea if done with attention to both business strength and the attendant amount of stock carnage.
So far, from Monkey’s purview up in the branches:
SWKS: Business exceptionally strong; stock differential between high and low-- 47%. Conclusion: STRONGEST BUY.
AMBA: Business growing but wobbly b/c gopro. But a 71% drop!. Conclusion: strong buy.
LGIH: Strong housing numbers. But 10 P/E!. 40% drop from high. Conclusion: Strong buy.
INFN: Business Strong. New moat-creating tech advances. Price drop 41%. Conclusion Strong buy.
AMZN: Beastliest of businesses. Maybe Monkey’s highest conviction pick long term out of any company on the planet. Decrease “only” 17%, so not a screaming buy in terms of discount, exactly but a strong buy in terms of everything else.
So These are Monkey’s Top 6 Saul Stocks to add. Forgive the crude abacus numbers–this is all just simple abstract thinking here. What positions are you furless ones most excited about adding to? Is Monkey missing some other absolute screamers?
Perhaps I’ll go first and talk to myself. A stock I’m most curious about is LGIH. The market simply does not believe the story. Why?
Interest rates are stupid low. The economy is doing well. Is the fear that the economy is not doing as well as we think and the first thing to go will be housing, no matter how cheap or affordable?
I’m not trying to make an argument for the bull case here; rather, I’m trying to understand clearly what the market is saying by its vote of no confidence in LGIH the stock. What are its bear case arguments?
Because down another 6% today. How tempted are others here to add more? Versus to wait (but for what?) What kind of conviction levels do you humans have about this one?
Perhaps I’ll go first and talk to myself. A stock I’m most curious about is LGIH. The market simply does not believe the story. Why?
I’ll take a quick wag at this. Main reason is probably oil. LGIH builds and sells home in regions (Texas, etc.) where the good paying jobs are related to oil exploration. Now with the oil market collapsing a lot of these jobs are in jeopardy (many of the companies are leveraged and will go under). With less good paying jobs, there are less buyers of these homes.
What’s the first thing any “investor” should do when an opinion is asked for about a stock? PULL ITS CHART. Not just any chart, and not a short-term chart, either, which can be mostly noise. But a chart of its whole history, which --for LGIH-- is very, very brief, which is already as much of a red flag and alarm bell as one needs.
I have no idea what the company does, nor care. But anyone who engages markets has to know from experience with other stocks that LGIH is still “wet behind the ears”. It’s still almost an IPO that cynical underwriters brought to market when the bulls were running and investor greed and complacency were high. Now that they’ve made their money, they have backed away from it. Hence, prices no longer have that source of support and have fallen to --possibly-- more sustainable levels. But that would have to be proven by doing the fundamental work required.
But my suspicions are this. When LGIH is dug into, as well as bench-marked against its peers, it will be discovered that the stock shouldn’t be bought now, if ever. It’s just fluff that should be let die. (IMHO, 'natch)
From their quarterly balance sheets: ‘Payables’ are roughly 5x ‘Receivables’. (This company can’t pay its bills.) But is it a ‘short’? Ah, that’s the more interesting question, right?
Short-ratios are something “investors” should be aware of. But they are nothing they should using to base decisions on, because short-ratios are just an opinion that “the market” might have right or wrong, and the ratios have complicated explanations that might not accurately reflect trading floor dynamics. Hence, they can be misleading ‘tells’.
Even “hard numbers” like reported Profit Margins or FCF’s are mostly bogus accounting tricks. But when a company can’t spin the trends revealed by their reported numbers in their favor, and when the trends are downward, this isn’t a company you want to be betting on, except from the short side, and that only after you’ve dug deep, deep, deep and truly know their financials suck and that you have the wind at your back of a market has now become willing to punish the stupid, the greedy, the imprudent.
Does LGIH fit that profile? Who knows until they’ve done the needed investigative work, which --properly-- is a combo of both “technicals” and “fundamentals”.
INBK may make my top list, but does anyone know if they have oil and gas exposure? Still think it’s a good company, but my conviction is weaker on it since the “rising rates” seem to be flattening the yield curve, which makes me less interested in owning banks at the moment.
1/14/2016 CASY reported sss prepared food and fountain up 7.1%;grocery and other merchandise up 8.2% in Dec 2015 yoy. Those are very good numbers imo. Ones a normal grocery store would kill for.
Five of those six are just “Beta Bets” for having tight, 0.96-0.98 correlations with the broad market and merit no present attention. All of them are showing declines equal or greater than the broad market. So the question becomes, “Are any worthy of being put into a watch-list against the time 12-18 months from now when a bottom has been put in and shopping should be resumed?”
Arindam,
In short, yes, I agree. From a business perspective those are my favorites. I’m not buying or adding to any of them yet as there may be better prices down the road
Five of those six are just “Beta Bets” for having tight, 0.96-0.98 correlations with the broad market and merit no present attention.
Arindam, why are you even on this board? You very clearly have a different approach to investing, and are also very clearly unable to treat the approach here with anything resembling respect.
There are thousands of TMF boards out there reflecting many different approaches to investing. People who are interested in chart-reading and market timing will be on those boards. And that includes the subset of folks who read this board and also share an interest in other approaches too, so you shouldn’t feel like you have to post here to “reach” those people.
Please take your approach to an appropriate board. You can even start you own if you wish. It’s the variety of topic-specific TMF boards that allows each of us to make the most of the community based on our own approaches and interests. No matter how right you think you are, your views are just one of many. Muddying up a board (any board) with off-topic approaches and responses ruins the experience for everyone else.
Neil, I love ya but I hate to see people chased off the boards. I just think it sets off a negative vibe. I haven’t been following the conflict, but would “ignore user” work in this situation?
Perhaps I’ll go first and talk to myself. A stock I’m most curious about is LGIH. The market simply does not believe the story. Why? Interest rates are stupid low. The economy is doing well. Is the fear that the economy is not doing as well as we think and the first thing to go will be housing, no matter how cheap or affordable?
Hi Monkey,
It is hard to understand. I think there are two factors. One is the threat of rising interest rates, which theoretically would make mortgages more expensive. This has knocked down the housing stocks all around. But interest rates will rise VERY slowly, if at all. It’s nonsense to imagine it will cut their sales nearly in half (stock price was actually up to $36).
Second there’s a lot of concern because Texas is the oil patch and 40% of their sales are in Texas. However, this has been going on for a long time now and they keep announcing record earnings. On a recent trip to San Antonio I see building going on everywhere, new businesses, large new complexes, etc
In essence LGIH doesn’t seem to be affected by any of this. They have their own niche and are mining it very well. I think LGIH is an amazing bargain. JMO
Neil, I love ya but I hate to see people chased off the boards. I just think it sets off a negative vibe. I haven’t been following the conflict, but would “ignore user” work in this situation?
Karen, just to be clear, I have nothing against that user (or others), nor their approaches. “Ignore user” seems to imply that I have no desire to read the posts from a person, and that’s definitely not the case.
But this is about a respectful and pragmatic approach to the community. Can you imagine if there was just one board in all of TMF and it was a giant free-for-all? It’d be utter madness, and next to impossible to keep up with the conversations you found relevant while easily ignoring the rest. We all only have so much time to spend on the boards.
Saul’s board is extremely busy. It’s already difficult to keep up with it. It’s only practical to keep posts as on-topic as possible, and publish off-topic posts to other boards where they are on-topic. TMF allows us to easily follow as many boards as we wish: everyone looking for content can easily find it if it’s published to a topical board.
There have been a lot of posts about market timing and technical analysis. Saul has made it very clear (in the past and again recently) that neither of these are encompassed by his approach. That doesn’t mean the topics aren’t interesting, or that no one finds the posts useful. But it does mean they belong on a different board where people who wish to follow and participate in those discussions can easily find them, and those who do not won’t have to wade through them trying to find the posts that are topical to this board.