Grand Deja Vu? Techs tanked, BRK surged

[Valuehalla]

The Tech meltdown stopped today and Techs bounced back.... lets await the next days..

[abyli]

Now we became day trader value investors? :)

[Valuehalla]

I am a day watcher and a decade trader.  ;D :)

 

(During the last 6 month I just bought CTL Centurylink, pls see my posts about CTL.) Thats it.

My first position in BRK I bought around 1st Feb 2000.

[DooDiligence]

I am a day watcher and a decade trader.  ;D :)

 

Perfect description!

[Valuehalla]

HERE WE GO:

 

Dow falls 100 points as tech stocks slide; Apple falls

 

http://www.cnbc.com/2017/06/15/us-stocks-tech-federal-reserve.html

 

[Valuehalla]

Here is a tabell based on 2015, quote from Semper Augustus Letter:

 

Tells you all you need to know.

 

[SlowAppreciation]

Here is a tabell based on 2015, quote from Semper Augustus Letter:

 

Tells you all you need to know.

 

For the record, I love the Semper Augustus letter. But to be fair, in just 2 short years FB has increased profit by 3X, Google has added another 20% in profit, and AMZN has also increased profit by 3x-4x (but FCF is a more accurate measure of their profitability)

[maverick]

On Friday, tech tanked, but financials were up iirc, so no big surprise that BRK was also up. ¯\_(ツ)_/¯

 

I think one is seeing a rotation from growth into value.

[KCLarkin]

FCF is a more accurate measure of their profitability

 

Why? Is stock based compensation not an expense? Is property purchased using a capital leases not CapEx? Is float added really profit?

 

 

[Guest longinvestor]

On Friday, tech tanked, but financials were up iirc, so no big surprise that BRK was also up. ¯\_(ツ)_/¯

 

I think one is seeing a rotation from growth into value.

 

Not a chance, value is dying a slow death. It's growth from here to judgment day. And j day is near. For just a few winners who've taken it all. You heard it here first.

[SlowAppreciation]

FCF is a more accurate measure of their profitability

 

Why? Is stock based compensation not an expense? Is property purchased using a capital leases not CapEx? Is float added really profit?

 

SBC is, and I include it in FCF. AMZNs SBC is overstated though because of their shorter employee tenures and back-weighted grants. And yes, I too agree that cap lease payments are a reduction of FCF so I include that too.

 

I just said FCF is more accurate than profit in AMZNs case, and I include both those items in the calculation of FCF (but only ~50% of SBC). So I'm not sure what we're arguing?

 

[KCLarkin]

I just said FCF is more accurate than profit in AMZNs case, and I include both those items in the calculation of FCF (but only ~50% of SBC). So I'm not sure what we're arguing?

 

I'm not convinced that working capital changes accurately reflect Amazon's underlying earnings. They are a derivative of growth. And if you subtract WC, 1/2 SBC, and capital leases, the number gets very close to NI. And depreciation seems like a more accurate proxy of maintenance capex than CapEx plus capital leases, so I think your life would be easier if you started with net income and then made your adjustments. Then you can add back growth investments which flow through the income statement.

 

This might not be true in your case, but I think many Amazon bulls prefer the FCF number simply because it is higher.

 

--

 

This is probably obvious in light of Buffett's recent comments... But all the historical data on value versus growth is based on "old school" growth stocks. As Buffett points out, modern growth stocks (Apple, Google, Facebook) are able to rapidly achieve very large markets, with high margins, and enormous ROIC.

 

It took 125 years, for Coca-Cola to reach $7B in net income.

 

It took Google 18 years to reach $20B in net income.

 

In other words, this time really is different. And historical relationships between growth and value might be breaking down. Certainly Google and Apple have been ridiculously underpriced for much of their history. Many value investors would be wise to selectively add some of the "new school" growth stocks to their portfolio.

 

Edit to clarify: What I'm trying to say is that the dynamics of growth stocks versus value stocks isn't any different. A few growth stocks are big winners. Most are losers. But what is different is that the winners are so big, that it might mathematically tip the odds in growth's favour.

 

--

I do worry that Amazon, Tesla, and Netflix might be forming bubbles. But I don't think anyone could argue Facebook, Google, or Apple are egregiously overpriced.

[Valuehalla]

Techs bounced back yesterday..... melting is over for now ?

[abyli]

Techs bounced back yesterday..... melting is over for now ?

 

I wish the melting last longer so that I can accumulate more "bubble" shares...

[SlowAppreciation]

I just said FCF is more accurate than profit in AMZNs case, and I include both those items in the calculation of FCF (but only ~50% of SBC). So I'm not sure what we're arguing?

 

I'm not convinced that working capital changes accurately reflect Amazon's underlying earnings. They are a derivative of growth. And if you subtract WC, 1/2 SBC, and capital leases, the number gets very close to NI. And depreciation seems like a more accurate proxy of maintenance capex than CapEx plus capital leases, so I think your life would be easier if you started with net income and then made your adjustments. Then you can add back growth investments which flow through the income statement.

 

This might not be true in your case, but I think many Amazon bulls prefer the FCF number simply because it is higher.

 

--

 

This is probably obvious in light of Buffett's recent comments... But all the historical data on value versus growth is based on "old school" growth stocks. As Buffett points out, modern growth stocks (Apple, Google, Facebook) are able to rapidly achieve very large markets, with high margins, and enormous ROIC.

 

It took 125 years, for Coca-Cola to reach $7B in net income.

 

It took Google 18 years to reach $20B in net income.

 

In other words, this time really is different. And historical relationships between growth and value might be breaking down. Certainly Google and Apple have been ridiculously underpriced for much of their history. Many value investors would be wise to selectively add some of the "new school" growth stocks to their portfolio.

 

Edit to clarify: What I'm trying to say is that the dynamics of growth stocks versus value stocks isn't any different. A few growth stocks are big winners. Most are losers. But what is different is that the winners are so big, that it might mathematically tip the odds in growth's favour.

 

--

I do worry that Amazon, Tesla, and Netflix might be forming bubbles. But I don't think anyone could argue Facebook, Google, or Apple are egregiously overpriced.

 

I don't disagree with this. While I think there's a bubble around NFLX and TSLA, it's harder to say for Amazon. Bezos seems to purposely obfuscate financial reporting a la John Malone. So it's really hard to say whether their FCF is $7b or $2b. But as crazy as it sounds, I'm not sure it even matters much today. Buying AMZN today is basically taking the bet that they can reinvest 100% of earnings/FCF at 30% ROIC for the next 15 years. I'm not convinced this can happen, but I'm also not convinced it won't. So I'll just keep sitting on the sidelines for now.

[Valuehalla]

Two different opinions:

 

http://www.cnbc.com/2017/06/24/stocks-to-plummet-40-percent-or-more-warns-marc-dr-doom-faber.html

 

http://www.cnbc.com/2017/06/27/some-fang-stocks-are-still-undervalued-salesforce-ceo-marc-benioff.html

[John Hjorth]

I haven't looked at the FANGs today, Valuehalla, but I see BRK relatively stable at closing compared to yesterdays closing measured in USD, while at the same today down relatively much on the monitor measured in DKK.

 

DKK/EUR relative rate stable.

USD/EUR down about 1.23% for the day. I don't know why, I'm not a macro guy.

 

I call it the "pleasure" [sarcasm intended] of owning BRK and having a functional currency related to a country on this side of the Atlantic Ocean. It always make me think about all those T-bills and cash in BRK basically pulling only a pittance.

 

The best I can do now with free cash is 0.85% basically risk free without making it a time deposit at an account in Bank Norwegian, up in Oslo - nominated in DKK - but an overseas account - with extra tax reporting hassle.

 

Oh well.

[Valuehalla]

Sure..BRK "just" stable today in US$ = ,  so this is better than the market (S&P500)  and Techs were much more worse than market avg. today

 

I think - like WEB - currency changes cant be predicted by anyone. But for me, as being located in Germany, a bad day... I whish to see parity EUR USD  ;D or below

[John Hjorth]

.. I whish to see parity EUR USD  ;D or below

 

Valuehalla,

 

Here we don't share interest, because I have started adding again, in drips, most likely for 3 - 4 years, perhaps 5, if we - all of us - until  then - do not hit a recession.

[clutch]

I don't think owning techs and BRK should be exclusive. I've owned BRK, AMZN, and GOOG for the past twp years and they all have been among my best performing stocks.

[Valuehalla]

Find enclosed a chart, which compares BRK with the S&P 500 and with the FANG from the 8th June on, till now.....so the time after i posted the Deja Vu article on evening of 9th June (the Deja Vu day), till today.

 

RESULT: The Deja Vu is on track 3 weeks now: BRK is the winner (+1,44%) since 8th June, No2 is Mr Market in avg S&P 500 (- 0,58 %), and than come the FANG (worst Netflix:- 9,52 %) .

Deja_Vu.pdf

[clutch]

It'd be interesting to re-visit this post 1, 3, and 5 years later and compare the returns.

[Valuehalla]

https://www.bloomberg.com/news/articles/2017-06-30/technology-selloff-couldn-t-come-at-a-worse-time-for-these-funds

[John Hjorth]

I don't think owning techs and BRK should be exclusive. I've owned BRK, AMZN, and GOOG for the past two years and they all have been among my best performing stocks.

 

It's religion, clutch! [ ; -) ]

 

The ten commandmends :

 

Exodus 20:1-17:

 

Thou shalt have no other gods before me

 

By investing in both BRK and one or more of the FANGs, you are a hethen right now, ref. the above quote - because you have more than one God. Please still note my [fully intended] smiley at the top of this post. I'm not trying to patronize you here. [please put smiley here again].

 

What is important to note here is, that that every God of ours each of us here on CoBF hold on to - each of them! - has the same God [in the meaning: God of Gods]. That God is called: Time!

 

So, it's about personal consistency - to try to get the right connection between your gut feeling and what's going on in your brain. The brain simply has to supress your gut feeling to get it right sometimes. Other times your parts of your gut feeling has to rule, to keep your out of trouble.

 

It is just a so incredible hard and fascinating experience, and exactly that is what drags persons into it, because of the challenge embedded in it.

 

No matter how you do end up finally - broke after a blow up, or rich, or somewhere between - to all degrees - you will always have the privilege of having tried to test the relation between your gut and and your brain.

 

Entering the scene with money, leaving with money [hopefully a lot more] - or not, certainly matter [at least to me].

 

What the experience of successes and and failures has done to you, nobody can ever take away from you, on a personal level.

[Valuehalla]

One of clutch feets seems to be in hell already.

Lets be firmly in faith. Maybe a good Excorcist can help him out.  ;D