Jump to content

Stocks you think are "cheap" but the majority of investors find expensive


Picasso
 Share

Recommended Posts

I am curious if there are any non-typical "value" stocks in the sense of future returns dwarfing the current share price despite high P/E multiples or some other stretched surface metric.  I know some on this board are big fans of the returns AMZN can provide.

 

I guess the post should be "stocks you own but are too ashamed to share with your peers."

 

Tesla and GoPro are my guilty stock pleasures. 

Link to comment
Share on other sites

Discovery Communications is a possible candidate to my mind. They own a 51% stake in Eurosport which is like the ESPN of Europe.

The market cap of Discovery is hovering around $US 20bn. ESPN is worth maybe $US 50bn today, so I see some potential in that ownership stake. Then you have Discovery/Animal planet, the OWN interest, TLC, and others.

Link to comment
Share on other sites

I'll post "stocks that I think are expensive, but I hold because I think they might outperform even though they are expensive"

 

FRMO

Everything Malone (Lalphabetsoup + DISCA)

DISH

TDY

CFX

COST

GILD

BRK :) (not very expensive but getting there)

Link to comment
Share on other sites

Guest Schwab711

FICO

MCO

TDG

AXP

GOOG

 

Basically I think there are a lot of extremely high quality names trading at 10x - 15x EBIT are generally very cheap. The key is they must be of the highest quality. At 10x EBIT you make Warren Buffett money but 10% - 15% compounded is available currently.

Link to comment
Share on other sites

LBTYA

DVA

Very strong underlying cash flow growth that should be more or less recession proof.

 

If you buy the mid term deflation thesis I'd also add EQR. Looks very expensive and Sam Zell sold $150m worth of shares back in July. But it's a hedge against inflation and deflation at the same time, and provides a higher yield than the 30y US government bond.

Link to comment
Share on other sites

LBTYA

DVA

Very strong underlying cash flow growth that should be more or less recession proof.

 

If you buy the mid term deflation thesis I'd also add EQR. Looks very expensive and Sam Zell sold $150m worth of shares back in July. But it's a hedge against inflation and deflation at the same time, and provides a higher yield than the 30y US government bond.

 

can you explain  how a high multiple levered real estate company with short lease terms is a deflation hedge?

Link to comment
Share on other sites

LBTYA

DVA

Very strong underlying cash flow growth that should be more or less recession proof.

 

If you buy the mid term deflation thesis I'd also add EQR. Looks very expensive and Sam Zell sold $150m worth of shares back in July. But it's a hedge against inflation and deflation at the same time, and provides a higher yield than the 30y US government bond.

 

can you explain  how a high multiple levered real estate company with short lease terms is a deflation hedge?

 

This is not a general statement. Everything with stable cash flows in a low growth environment is a deflation hedge. This is not true for every REIT but refers to EQR's assets: apartments in prime locations. Currently, rents there are growing at multiples of CPI rates and I think the current rent level is (at least) sustainable for a few years because of 1. demographic developments, 2. urbanization and 3. the growing number of rich people worldwide (wanting to rent/own an apartment in NYC, for example). If EQR's cash flows are stable, it will be much more comparable to a long term government bond than to the equity market. Long term government bonds are deflation hedges. But EQR is also able to raise its coupon. I think it should trade at a premium to the 30y government bond – even in a deflationary environment and it trades at an (albeit shrinking) discount.

 

I think there is a widespread misconception of levered assets in deflationary/slow growth environments. Leverage is only problematic when you're facing shrinking cash flows.

Link to comment
Share on other sites

fair enough. I guess I just associate deflation with economic slowdown and I don't think any real estate asset, regardless of quality, is immune to decreasing rent. Washington DC (EQR's largest exposure) has already seen a bit of a rough patch and rents have come down by a hair (DC metro area revenue was down 0.5%, looking at their recent presentation).

 

Associating short lease real estate with treasuries tingles my spidey sense but the crazy rise in the REIT index so far proves my spidey sense without merit. Triple net lease to a bunch of Walgreens and BoA's, yes. But not a bunch of nice yuppie apartments rented to financial analysts and government consultants.

 

 

Link to comment
Share on other sites

fair enough. I guess I just associate deflation with economic slowdown and I don't think any real estate asset, regardless of quality, is immune to decreasing rent. Washington DC (EQR's largest exposure) has already seen a bit of a rough patch and rents have come down by a hair (DC metro area revenue was down 0.5%, looking at their recent presentation).

 

Associating short lease real estate with treasuries tingles my spidey sense but the crazy rise in the REIT index so far proves my spidey sense without merit. Triple net lease to a bunch of Walgreens and BoA's, yes. But not a bunch of nice yuppie apartments rented to financial analysts and government consultants.

 

This was my first reaction, too. But, referring to REITs and deflation, take a look at this:

http://www.smtri.jp/en/JREIT_Index/img/J-REIT_Index_graph_e.pdf

Link to comment
Share on other sites

Discovery Communications is a possible candidate to my mind. They own a 51% stake in Eurosport which is like the ESPN of Europe.

The market cap of Discovery is hovering around $US 20bn. ESPN is worth maybe $US 50bn today, so I see some potential in that ownership stake. Then you have Discovery/Animal planet, the OWN interest, TLC, and others.

 

I don't think Eurosport is comparable to ESPN at all. What's their biggest rights? Cycling and some tennis coverage. For the average sports fan Eurosport is pretty much a joke, although obviously there is a niche audience for tennis, cycling, snooker, darts etc.

Link to comment
Share on other sites

I guess making VRSN and RSG my top two positions would get me laughed at around here.

 

What do you like about RSG?  I noticed some big recent buys by Michael Larson and couldn't figure out the appeal.

 

FWIW, I really like RSG (I don't own it right now). It used to be a core position of mine many years ago. I think they're in a good business that has a lot of tailwinds over the long term -- mainly that we create more and more garbage!  Scale is also crucial in that sector and basically only RSG and WM have enough scale -- I expect that over the long term consolidation in the sector will only continue making their business that much better. 

 

One good and bad thing -- every time RSG drops even a little bit, it seems that Cascade (Bill Gates' investment vehicle) buys it by the boatload. 

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share

×
×
  • Create New...