thepupil

does it matter? could be the best company in the world and it doesn't make sense that someone who's comfy with 1-2% positions has a 50%+ position.

what are the consequences of selling? what's your basis as a % of market value does it have a listed options market? are you a candidate for the numerous wealth mgt solutions for this? how many years of savings does it represent? Are we walking like "I have $20K of SaaSco and save $50K / year" or "I have $2 million of SaaSco and save $50k / year?" Why hold it? if you're not comfortable with a >50% position, then why have it?

agree on Elon complex, valuations look dumb my stupid little mutual fund trade notwithstanding. on memory, it’s tough for me to agree in that earnings have absolutely exploded and that for these to trade at “intrinsic value” assuming this only last a couple years they’d probably have to trade for like 3x earnings which isn’t really realistic for mega caps so they trade to like 8….like with hindsight Micron at $100B in 2023 was trading for 1x 2027 earnings, so with hindsight we know that it was well below its intrinsic value (unless they never earn another $1 or estimates are way off). they’re shifting to longer term contracts which one experienced person I k ow says that always marks the top of the cycle but does lengthen the period of supernormal return. in other words, they might be worth 50% or 60% less on a true PV of earning, but are we really THAT confident the supply response will destroy earnings THAT quickly. I am not. The difference in supervycle length of 1 or 2 years is like a few hundred billion of earnings. and then the leaders as you say are potentially worse businesses than before from all this, but also like no one else can muster the scale of resources like they are… I’m more in the wishy washy useless Howard marks camp “be a little cautious / don’t go all in on any one view” with that said yesterday was amazing, market down 2.5%, portfolio up 1-2%. Let’s have more of those please! One of the tensions to manage is if you think the market leadership /stuff at the top is a little optimistic, then you might be cautious on market and think everything goes down….or you could have rotation into other stuff…I just stay mostly invested / root for rotation, but obviously if it all goes down the. Hedges/cash whatever would be better. Can’t predict that. Yesterday felt more like rotation and it was glorious. Who knows what tomorrow holds. Given the degree so many invest passively, I’d think eventually everything goes down if the big stuff does.

This is probably the most lucrative thing Greg could do. Announce $5 billion allocation to SPCX. Berkshire goes down 10-20% and share repo window opens wide

+1 Berkshire needs to deploy like $40B/yr to stand still on cash, they need to deploy like $200B or so of excess cash. not even clear (yet) that Berkshire is a net buyer of stocks YTD. it's nothing.

one thing I haven't seen discussed too much is a goal of portfolio simplification. they were net sellers of $10 billion of stocks in Q1 (from Q), completely exiting 16 stocks, going from 40--->26 (quick AI search result). Would i prefer a berkshire that owns $30B or $50B or $60B of Google, researches the company well, interacts with management in a real way, learns stuff about what's goinng on in the world from that diligence/ownership to one that owns 16 meaningless stock positions managed by a mediocre market neutral financials PM that happened to charm Buffett (which is who Todd Combs was)....of course, I'd prefer that that, it's not like he sold 50 cent dollars to buy Google. now in reality that's not how it went down exactly. Todd left, he blew out of todd's portfolio...the alphabet deal came together over weekend, goldman called Berkshire and berkshire took it down. but in substance, we have a Berkshire that has a still small, but more material position in a leading business rather than a berkshire that owns a bunch of meaningless positions....even if it's not particularly "cheap" this is also marketing. you're showing that you're good for 11 figures over a weekend at a very reasonable / commercial discount. it's also not wildly off from an index like position in alphabet, not that Berkshire is direct indexing....but there's like 6 stocks that matter Apple ($70B) Amex ($47B) Coke ($30B) Japan (trading houses) ~$30B Alphabet ($30B) Energy (CVX/OXY) ~$30B

this is wild. from a U.S. attorney.

Left found guilty of fraud. Not entirely surprised but saddened by this news.

our robust and completely useless discussion here compelled me to short a bit...made some beer money shorting COST for 10 days, +11% vs mkt, yay.... sometimes you just have to touch the stove...just to feel something

Funny part is he wrote that in 1998, then a lot of those stocks had bad returns for the next decade or so….i demand a revisiting of the revisiting lol

so i get what you're saying....but if someone asked me, without having a week or a month or a year to study the business and predict what the next 10 years of COST's revenue/EBITDA growth might look like....I might just might take into account its history of 1992 to present where its bounced around from 7-11%...like we have 34 years of data. i think that data has some informative value as to the future. to be clear, i think one could make an intellectual argument as to why COST's record justifies it trading where it does or why go forward might be better/worse than past or whatever....using their superior insight/prescience/deep study of business / whatever....but this exercise is by no means completely divorced from financial data and numbers (IMO). at an extreme, if COST traded for 500x, we wouldn't just say "well it's a good business"...just like value boys would never demand a 15% FCF yield or someonthnig ridiculous from COST i think the initial #'s are a first pass or set the hurdle one must clear.....like obviously the market is saying this is a great biz w/ long duration of earnings compounding ahead of it...so as a potential owner you have to get confidence in that (using all the qualitative stuff) AND get some sense for how much you're going to get paid if you're right or lose if your wrong [this last piece i don't understand how one can do without the recent, future numbers and some range of potential future multiples] to gregmal's point, COST is actually such a consistent business that it's very easy to throw numbers in the spreadsheet and swag things... anyways...way too mcuh ink spilled for me today on a stock i've never touched. 10 yr rolling periods, 1992-2002,1993-2003 and so forth

so what do you all propose as an alternative? DCF? (P/E is a shorthand DCF) TAM based analysis (like: assume COST inevitable takes x% of y% of affluent peoples spend at z% margins, discount to present, two step DCF? no quantification of risk/reward and just own forever? educate the PE focused simpletons as to how one might frame the risk/reward of COST... to be clear, almost nothing i own has a low PE or is an operating company...i don't sort by PE to pick stocks....but i just don't understand how one wouldn't consider the price paid relative to T12, 1y fwd, 3y fwd, 5 yr fwd 10 yr fwd earnings, exit multiples, etc in thinking about a stock.

lol at the NVDA example...I mean, yes, when earnings go from $10B to $200 billion in 5 years, P/E (of any kind, trailing 1 yr, 2, yr) doesn't matter...that hardly seems relevant.

how do you know it was a mistake though? if the stock is below where you sold in 3 years and your other investments have OP'd it, was it a mistake? I mean we never really know what's a mistake. we can only act w/ information we have today. i don't think anyone here is claiming an "edge" regarding analysis of COST because of its optically high forward (and trailing) PE's. People are expressing a valid concern regarding a de-rating given it's re-rated positively for 16 years. and bulls are free to counter that when g > r justified PE is infinite and that COST above all business probably has the potential to have a g > r for a really long freaking time (probably not infinite). it's very easy and most definitely not an "edge" to avoid COST because one requires a higher earnings/FCF/whatever yield and one doesn't want to drawdown if multiples decline...or you can say "de-rating bedamned...still growing at high rate and will do so "forever" so wake me up in 20 years at high returns....(or 1,3,5 years if multiple stays flat or keeps going up)....i don't think either person possesses an "edge" regarding the biz.... is anyone really saying they have an analytical edge? or are they just expressing timidity regarding the multiple. the two are very different things.

well it's funny because you express this in terms of value boiz being complete idiots for caring anything about valuation, when from my seat you bought a high quality, growing business, and sold it somehere in the orange zone which seems like an astute and reasonable and valuation sensitive thing to do....doesn't exactly sound like you're chomping at the bit to buy in the red zone. my stylized graph of valuation risk for COST...this is my life's greatest work.

I couldn't resist some 30 yr TIPS for mom's IRA today at 2.85% real...selling one of my more rate sensitive stocks at ATH's to buy....it's tough because i still think that this stock is cheap on a 5-10 yr basis and will probably do better than the bond, but i just kind of have to buy long term inflation protection as it gets cheaper and am coming from a place of owning little bodns at this time. @2%-4% CPI = 5% to 7% carry from cash + principal accretion if trades to 5% real yield, 33% downside if trades to 4% real yield, 20% downside if trades to 2% real yield, 20% upside if trades to 1% real yield 50% upside 0% = ~90%

so here's a fun one...this is the rolling 5 year change in forward multiple from 2010 to present (ie starting in 2015 what was the change in forward multiple from may 2010 to may 2015, june 2010 to june 2015) etc. since the GFC, there has never been a 5 year period in which increasing fwd multiple was not a tailwind to COST investors, which is why value investors and rich people can have had this debate the whole time. the stodgy pocket protector value guy can say "well it won't always be like the last 5 years"...and the rich guy can say "you said that 5 years ago too and i'm richer today than 5 years ago"....it's evergreen. the median/avg/min/max = 30%,33%,4%,75%....so in your typical 5 year period, you've had [roughly] a 5-7% tailwind from multiple expansion....of course your string that together for 16 years and you have a fwd multipl that goes from 18x to 50x.

COST has grown relevant fundamental metrics by 9%-14% over the last decade, 9-14% over last 8 years (to start after TCJA), 9-13% over last 5, 7-11% over last 3 years. To the extent, COST has made more than those metrics, it's because, rightly or wrongly, the stock's multiples has expanded, specifically, the stock has made 23%/yr / 710% for last decade while it's 1y fwd multiple went from 25x--->50X...if you don't like PE you can use whatever you want (price to sales has gone from 0.6x to 1.7x, EV/EBITDA 12x to 31x, FCF yield from ~3-4% to 1.9%) You can get to that, by just saying at constant multiple it would have done 14%/yr (3.7x) but multiple expanded 100% (2x) =3.7x*2.0x=7.4x = 630% (the stock's price return w/o divvies invested), then divvy reinvestment gets you to 710%. Now, was it "correct" that Costco traded for 25x in 2016? Well we have more information now. COST durably grew its earnings by 14%/yr for a decade. It seems more than reasonable that something set to quadruple earnings would trade at 25x. Said differently, one was buying cost for a 10 year forward 16% earnings yield...the "equity coupon started at 4% and ended at 16% and shareholders made a shit ton. I'd also point out that 30 yr TIPS yielded 0.9% in 2016. Today the equity coupon is starting at 2% or so....growth seems a little slower too...where it will trade in 5 or 10 years? I couldn't tell you. today 30 yr TIPS is 2.9%. Now, I'll humbly admit, I would never have thought we'd see COST trade to its ATH (ish) valuation while 1) the broader market [fueled by AI] is growing faster 2) fixed income offers an actual alternative 3) the world seems....fragile my explanations would be 1) COST is an amazing company and those who own it don't need to sell 2) COST is QQQ's 14th biggest holding and SPY's 20th, passive, valuation agnostic flows. 3) it deserves a very high multiple...whether that's 25x or 30x or 40x, I don't know. 50x "feels" very high. WMT trades at 45x...both are AI resistant...both own large share of people's wallet at low profit margin... you can plug in next decade growth of 7-15% and next decade exit multiple of 15-50x and you get IRR of -5% to +15%...obviously that's analytical garbage in / garbage out, but it certainly seems more skewed to the downside than ever. I'd swag 11% / yr growth exit @ 30x = 5.5% + some divvies = mid single digits IRR. risk averse types look at that and say no thanks and "scoreboard bitch" types look at the stock price from their yachts....it is what it is.... on a near term basis, I'd speculate COST is trading up because people who are long AI/semi's are short cost to hedge out their momentum factor and there's a sell-off in semis so some degrossing from those who've made a lot of money lately so they're covering their COST.....the world is a weird place.

SPX 2026E: 336 SPX 2036E @ 7% nominal growth: 660 Exit Multiple: 20x. SPX in 2036: = 13,200 = 5.9%/yr+1% divvy = 6.9%/yr. 10 yr bond = 4.6% Implied equity premium = ~2%. Is it therefore rational to buy stocks w/ a LT time horizon? Yes. Could these assumptions be wrong? Yes. Maybe SPX falls 40% in 3 years and then makes more than 7% to get to 7%. Maybe you have a lost decade where stocks do nothing. Maybe one therefore doesn't want to be 100% long US stocks of the cap weighted index. Maybe mix in some bonds. Maybe buy some individual stocks if you have $$$ outside a 401k (which is the only reason index levels would be the only consideration etc). just gotta play whatever cards you're dealt.

why don't you think this happens in NYC? Everyone does this until like age 26-30 in NYC. when i was an analyst, someone 7 years older than i was was still living with 3 roommates. he was a VP at an investment bank. I mean i've never not had a roommate since leaving high school. 3 years in the dorms/apt, 1-2 roommates.... then a few years in NYC with roommates (3 people in 2 bedroom, converted living room...all three of us at standard wall street comp), then a few years elsewhere with roommates, then moved in with girlfriend/now wife @ 28 yrs old. who the hell is living alone < 30 in NYC? people with unlimited $$$$ and time???

i'd also add that ETF's can be super helpful in the case of analysis paralysis. example, in late 2022, i'd done well on relative basis for the parents, because didn't own as much tech....couldn't figure out which company to buy....just bought QQQ...did i know NVDA would lead the AI revolution? hell no. did i think i had owned a fair bit less tech than typical and could use some more. Yes. same with international stocks in 2025 when incremental currency and country diversification seemed good to have and tarriffs had stocks selling off. i think indices are a useful tool for active folks too...i had sold some berkshire in 25 didn't have any place to put it....throw it in some international index...that's like a +40% pretax decision... this isn't meant as some victory lap, but just trying to bring to life simple decisions using passive etf's

a few things - the passive equity index is VT (which is 65% US). 100% US allocation is an active decision....one can go further and say 100% equity may not be the truly "passive" portfolio if you take the logic of market cap weighting to its logical conclusion, the global investible asset index is....more stuff...but just saying that I do think there's a case, for passive portfolios to include international....bogle/buffett themselves have said S&P 500 is fine and has sufficient diversification / international exposure, but i think in the end 100% US yhou're still picking US companies to win and that may not always be the case. - with that said, i think in real time we're seeing diminishing benefits of international diversification as AI is driving both the EM index (TSM / Samsung / Hynix etc) and the US indices. International Developed is a bit more balanced. whole world is large cap tech / AI trade whether its Taiwan Semi or Nvidia or Samsung or ASML. this is said w/o a strong view regarding the durability thereof...i did prefer it when international indices were less tech-y and less hot. - one of the tough things i have found with passive exposure is that it's more nebulous. we can all read about the historical earnings growth of indices, and have that provide us conviction to hold and continue to buy through volatility, but it's not quite the same as touching and feeling a business. active management provides a highly useful illusion of control. I have found myself wanting to sell my passive investments when certain global things happen (i rarely act on this), but haven't had the same urge with individual stocks bought with a margin of safety. some folks OTOH are the opposite and can keep the faith better in indices. - you should ask yourself which type you are. set up your portfolio in a way that you think will allow you to make rational, long-term decisions. - the decision need not be binary. i am beneficiary to a small trust. i don't control the cash flows or the investment mandate. it's in a portfolio of ETF's/stocks that more or less makes global index - the advisor's fees. i also have a good bit in 401k's because ahve been at job for a few years now so haven't been able to roll to IRA in a while. the summation of these two things is i have a fair bit in indices of some kind. I can still actively manage the rest of portfolio and have some indices...obviously this dilutes my outperformance/underperformance to index....but...it's fine. I think it's reasonable to put 1/3 or 1/2 or more in passive and add to both portfolios over time and see who wins or rebalance b/w two to hedge your brain/abilities. let's say you're god's gift to investing. if so, the active portfolio will gain more share over time. - passive is incredibly tax efficient, i pay 45% of short term gains to taxes. I presciently bought ALEX the month before it got taken over....cool. after tax, it kind of sucks. if you're high income, live in a blue state, and your assets are more weighted to taxable vs tax advantaged and you don't have ways to potentially offset gains....the case for some passive is strong. I like to actively manage portfolio and stuff as much dough as possible in tax advantaged and now run high gross offsetting indices/other stuff to try to create artificial tax losses, but i think it's really really hard to make case for active management after tax from a pure risk/return perspective....of course if i lived in FL or TN, and had lower income, this changes. you can monetize w/o selling and one's investment style will significantly impact the degree wo thich this matters. -

w/o further crowding this thread w/ my irrelevant personal hangups, in the end, I want $2mm ($1mm/kid) more of present value than someone who doesn't wish to help their children w/ down payment/grad school/whatever, has free childcare, and uses all public school. i either go get that or pay as i go by working. i think other than that, we're not that different in our thoughts on this and yes, we're talking about 2 different things. i'm thinking the number where i'd feel comfy of both of us exiting the workforce...you're talking about a number which provides some flexibility.

I view FU money as 300*monthly so $5K=$1.5mm, $10K =$3mm, $20K=$6mm, $30K = $9mm if anything, AI uncertainty around employment has probably brought my number up over time.. i don't know if my thoughts have changed....all i know is i don't feel like i have FU money and if i paid my mortgage off tomorrow, I'd have a lot more than $500K left so my FU number is much higher.

to be clear, i don't think i "need" $20mm. to be completely immune to a 50% drawdown though and be investing with "money i don't need"...i might.