Valuation

Investment Analysis Clubs Where Angels Fear to Tread
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I see Dreamer has again strayed from the straight and narrow, wandered into Saul’s briar patch with the Gospel According to Valuation.

He is correct. But it nearly misses bullseye. I go back to the money line from the Epsilon Theory blog post. If you find alpha that the market does not recognize, cherish it and ride it because IT IS A RARE THING. When the market does recognize it, its not alpha anymore, and this is reflected and identified by… valuation going all to Hell. Dreamer identified that early to mid-2021. The latest thread over at Saul’s misses the mark by a mile. It isn’t recession or interest rate or inventory cycles. When every other blog post contained “SaaS”, there was no bloom on the alpha rose. The game is over. They are not going to find the next DDOG/CRWD/ZS. The gold in this creek has been found. The next boom will be yonder, over the mountains. IMO. Doesn’t mean there isn’t money to be made, but 15% or 20, not 150% or 200. I get emails from MF about stocks on my watchlist (which I haven’t updated for over a year), and other Rule Breaker stocks. I haven’t bothered to read most of them. Boring. Campground company? 2005 era restaurants? Hardware companies? Yawn. But maybe that’s where the 15-20%-ers will be found and compound that over your IRS “guaranteed” actuarial remaining life span and it is still a nice number (inflation?).

I gathered some numbers to post my August results and it made me want to puke. Looked up my end of year statement–which of course showed November end. Had to stare that in the face and see I was down 13 to 15% for December and rode the elevator pretty far down the building. Ugh. Because UPST had EPS that showed value… I guess it will again in a few quarters. Anyway, up 5.6% for August. A year of that and I’d be up 91% from July end. :slight_smile: It is a long slog upwards, with wind in y’er face and danger abounding.

DW’s incision healing much better, so the tough love produced results. Toes maybe safe?

Two puts are in the money as of Thursday end. Premarket up, so I might slip through UPST well clear, but I could own twice as many DDOG and ZS shares come Saturday morning. Not too concerned.

KC

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KC,

I should have read your post before replying to Dreamer.

Glad to hear that DW is much better, hope she will recover soon.

Reading what you both post makes me realize that in fact, the charm of this board lies not only in what you post, but also in the way you post.

Wisdom for free!

By the way, am I the only one missing Champ?

Have a good weekend!

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The latest thread over at Saul’s misses the mark by a mile. It isn’t recession or interest rate or inventory cycles. When every other blog post contained “SaaS”, there was no bloom on the alpha rose. The game is over. They are not going to find the next DDOG/CRWD/ZS. The gold in this creek has been found. The next boom will be yonder, over the mountains. IMO. Doesn’t mean there isn’t money to be made, but 15% or 20, not 150% or 200.

–

Very well said.
Too bad only 5 people, their 20 doppels, and 1 TMF Overlord (looking at you, Jen) read this board.

That was definitely one of my points, but you phrased it much better. I tried to touch on it with the fact that you could find the smaller mkt caps with smaller multiples in 2017/2018, but by 2019 round of IPOs it was game over. Just look at how much larger and more expensive DDOG, ZM, SNOW and others debuted at, compared to finding the MDB/TTD/ZS/AYX/TWLO/OKTA and others a year or two earlier.

I remember bringing ZS to the boards, pre-IPO. I was pretty jacked about it, as it was more in my wheelhouse as they were competing against Cisco and others. But they debuted a bit too expensive for my taste, and I sat on the sidelines. Ironically this wasn’t a bad call for about a year, as they hit a snag (I think one of those “we got a new Chief Rev Officer and will figure stuff out” moments) and stock sagged in late 2019. Then of course y/y numbers got better and with WFH/Covid explosion, they were an ideal right-place right-time stock and took off from there.

Point is that the starting valuation does matter. Of course it does. What we can’t predict is how irrational the market can be, or for how long. (See UPST at $300+ vs now) What we need is a calm moment, when the market is thinking clearly and not agitated in one direction or the other…sort of like when Natasha starts doing her lullaby with the Hulk and he gets all mellow. In those moments, I think you see the “correct” valuation.

We haven’t had that market in a while. I would argue since the Dec 2018 plunge, we have been in a series of bridge-shaking vibrations that keep coming back like a pendulum. China/trade, Fed raises rates Dec 18, 2019 multiples balloon, Fall 2019 retraction…then just when it seemed like market was going to chill, we get right back to a hot start to 2020, then covid V, then SPACs, crypto, NFTs, Magnite becoming the next TTD (snort), Tesla, GME/AMC, wsb reddit. Just buy the dip, bro.

Nov 2021 hits and says “Nope” way before the movie came out, and toys are getting broken left and right and cigar butts litter the gutters and alleys.

I still think (hope?) we go much lower to offset the 2020/2021 excesses completely, and then overdo it, because that is what the market tends to do; overdo it in both directions.

Then maybe the vibrations slowly calm down. The pendulum sways become less and less, and we find ourselves where we were meant to be all along.

What is that…2023 at some point. 2024?

Dunno.

Dreamer

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I step out of the mists- maybe a little late, perhaps a little too slowly, but step out I do.

I am a religious checker, but non-poster, of this board because I use lots of brain smarticles tracking (and occasionally applying)your comments.

There will be a time when I have learned enough to jump in with more than my expressions of gratitude for not just the market wisdom but the companionship on the journey, but today is not the day and tomorrow is looking doubtful as well.

Until that day dawns, thank you for the generosity of spirit and the desire to inform that pervades this board.

This board has made me wealthier in all the really important ways so I thank you all.

Anitra

#DoppelsUnite

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