ERICOPOLY Posted March 21, 2020 Share Posted March 21, 2020 Today, I have been reading Fairfax's 2014 Annual Letter to Shareholders, but this is not really a Fairfax specific post so I'm putting it under 'General'. The valuation of three companies, Tesla, Amazon, and WhatsApp were used as examples of extreme market excess and they were shorting the market as a hedge because they couldn't believe the 'excess' out there: Here is the quotation from Fairfax's 2014 letter to shareholders: Last year, I quoted a major U.S. bank CEO who famously said, ‘‘As long as the music is playing, you have to get up and dance.’’ You can see how difficult it is not to dance! And what a party it was in 2013! The S&P went up 30% while the Russell 2000 was up 37%. As discussed earlier, the high tech stocks were soaring – particularly those with no earnings and very little revenue. Tesla Motors, for example, sold 22,477 cars in 2013 but commands a market cap of $31 billion, while Fiat, which we like, sold 4.4 million cars but has a market cap of only $14 billion. Amazon has a market cap of $167 billion but has not earned more than $1.2 billion in any one year since it went public in 1999. Facebook has recently made a $19 billion offer for WhatsApp – a company with approximately 50 employees and $20 million in revenue. This is the poster child for the excesses that prevail in the tech world! Tesla: because. it only sold 22,477 cars at the time, it couldn't be worth X... they delivered 367,000 cars in 2019. Amazon: it's stock now trades 6x higher just 6 years later WhatsApp: Facebook had no footprint with very young users, and this was a strategic acquisition (of unique value to the buyer). The price tag 6 years later is now $19 per user, not the $54 it paid per user at the time. Anyways, it's hard to know the future, isn't it. Link to comment Share on other sites More sharing options...
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