Daily General Discussion and spitballin thread Investing |
- Daily General Discussion and spitballin thread
- Daily Advice Thread - All basic help or advice questions must be posted here.
- Berkshire Hathaway beats Q4 EPS Consensus by 42.3%, repurchases $24.7 billion in shares, and continues repurchases this year
- Investments you own that you believe have the highest chance of 10X'ing in 5-10 years.
- Anybody else think that the moderation policy in this subreddit is a bit too much.
- Ignore the Talking Heads; How to Actually Invest in the Surge in Lumber Prices
- Potential lose decade coming: Where to hide
- Chasing Top Fund Managers
- How to leverage your portfolio if you believe a market drop incoming
- Severely undervalued weed play IMO - $CLVR
- Futures vs ETFs - What's up with the performance differences
- Why Forward and TTM PE ratios have become increasingly irrelevant in today's environment
- YieldStreet Prism Fund Experience
- Finding gems in the balance sheet
- Adding "riskier" tilts to VT
| Daily General Discussion and spitballin thread Posted: 28 Feb 2021 02:01 AM PST Have a general question? Want to offer some commentary on markets? Maybe you would just like to throw out a neat fact that doesn't warrant a self post? Feel free to post here! This thread is for:
Keep in mind that this subreddit, and this thread, is not an appropriate venue for questions that should be directed towards your broker's customer support or google. If you would like to ask a question about your personal situation or if you are asking for advice please keep these posts in the daily advice thread as that thread is more well suited for those questions. Any posts that should be comments in this thread will likely be removed. [link] [comments]  |
| Daily Advice Thread - All basic help or advice questions must be posted here. Posted: 28 Feb 2021 02:00 AM PST If your question is "I have $10,000, what do I do?" or other "advice for my personal situation" questions, you should include relevant information, such as the following:
Please consider consulting our FAQ first - https://www.reddit.com/r/investing/wiki/faq And our side bar also has useful resources. Be aware that these answers are just opinions of Redditors and should be used as a starting point for your research. You should strongly consider seeing a registered financial rep before making any financial decisions! [link] [comments]  |
| Posted: 27 Feb 2021 08:12 AM PST This is huge! Here's the annual letter: https://www.berkshirehathaway.com/2020ar/linksannual20.html The coolest thing is that despite selling some Apple stock, BRK shareholders' percentage ownership of Apple actually increased from 5.2% to 5.7%! Also, even though he states that $KHC was trading at less than carrying value at year end, the stock has since rallied. It now trades at about the same as carrying value as of Friday. [link] [comments]  |
| Investments you own that you believe have the highest chance of 10X'ing in 5-10 years. Posted: 27 Feb 2021 08:45 PM PST Something I've noticed, but it seems a lot of 10X investments tend to be controversial. I guess if everyone recognizes something as a good investment, then it would no longer be 10X as everyone is already buying that thing. Basically if you have a lot of people who are dismissive of something who've only researched that thing at a surface level, while on the other hand, you have another group of people who have researched and are thinking a bit deeper and are convinced of its potential, then there's a decent chance of it being a 10X candidate. Anyways for me it would be Lemonade. I think what's going on is a textbook example of innovator's dilemma. Lemonade at first entered a very underserved market (renter's insurance) to build brand value and recognition. They're now releasing new insurance products every 6-8 months. Meanwhile the incumbents have the luxury of a huge customer set but high expectations of yearly sales. They are still relying on a lot of legacy systems and core capabilities (broker based systems, software that's still running on COBOL). Many shareholders still expect yearly dividends. And so on. One interesting quote by the CEO of Lemonade "Ironically you have a better chance of creating a product that's 10x better than 10% better. And in order to do so you have to throw away everything you know and reason from first principles". Right now lemonade is ranked #1 in customer satisfaction for insurance, and they can give out and process claims in 1/10th the time as traditional insurance. [link] [comments]  |
| Anybody else think that the moderation policy in this subreddit is a bit too much. Posted: 28 Feb 2021 12:21 AM PST It's like you can't even add ****ing question marks at the end of your topic title without it getting auto-modded and removed. And there seems to be a billion key words that they added to the auto mod policy that removes your post. I made a topic that was getting some traction and then it gets deleted because I made a quick edit. I honestly don't know what it was. Y**Tu*e? S****ng **pha? At this point i'm pretty annoyed am considering just moving to the other place (I guess s*br****it and r*s**ks are banned words? Jesus). The rules are more lax. The quality of posts are pretty much the same as here. I literally had to edit this post 5 different times, each time deleting different paragraphs and rewriting it because there seems to be key words that are banned that doesn't even make sense on why they're banned. [link] [comments]  |
| Ignore the Talking Heads; How to Actually Invest in the Surge in Lumber Prices Posted: 27 Feb 2021 03:01 PM PST I've been following the surge in lumber for a while now and after seeing the talking heads offer dogshit advice on how to play lumber, I got riled up and felt the need to chime in for those looking to invest in companies that actually will be riding this wave. I'm not here to recommend any particular stock. I just want to post on why there's a surge and what type of companies are most likely to benefit from it because I don't see any good discussions on this topic in the mainstream financial media. Understanding the Surge in Lumber: The price of lumber is at a historical high right now and may continue to grow because of a confluence of factors that have led to very low supply and a concurrent very high demand. When we talk about a surge in lumber prices, we are talking about cut and prepared wood. We are not talking about the logs that are initially harvested prior to being processed into lumber. It is an important distinction because the price of logs is not soaring along with the price of lumber due to a glut of supply. After the crash in '08, homebuilding was slow to recover and has not kept with pace with demand. In 2020, demand for more housing surged when homeowners began looking to move out of the cities into homes with more space which in conjunction with the pandemic's surge in home improvement projects created a massive demand for lumber. On the supply side, temporary mill closures from Covid, as well as some permanent mill closures from lumber's crash in price in 2019-2020, closures in British Columbia due to the pine beetle crisis as well as other random reasons, have resulted in a decrease in the supply of lumber in the US and Canada. There are only so many sawmills in North America and those limited number of open and running mills has created a supply chain bottleneck. Despite these surging prices, because of how low interest rates are, home building so far has continued to surge and this will likely prevent the price of lumber from having any hard crashes for the near future. Also, despite these high prices, homebuilders are still making money. Case in point, Toll Brothers still blew away analyst expectations in their Q1 earnings through increased sales and home deliveries despite this surge in lumber prices eating into their bottom line. Now, the "analysts" in click bait articles like to point to January's 12% drop in single family housing starts in January as evidence of decrease volume, but they are leaving critical information out. (I.e. CNBC). First, TOTAL private housing starts only dropped 6.1%. Second, while housing starts declined in from December 2020 to January 2021, housing permits shot up almost 10%. For those new to this, permits typically occur 1-2 months before the start of construction of a home. Third, January/February are always the worst months for homebuilding for a very obvious reason: winter weather. So, right now we are on track for a significant jump in housing construction, and thus even more demand for lumber, that will be realized in the next couples months; important considerations that are noticeably absent from talking-heads clickbait. So while there was a small blip in housing starts in January 2021—and February will also likely be rough—come March/April, housing is on track to take off even further, despite these high prices. How to Invest in the Surge: Will lumber come back down? Absolutely. The billion dollar question is are when and how far. But because of how long it takes to build new production capacity and the fact that the demand for news homes is not going away any time soon, the entities who actually produce lumber will probably have a great year this year, maybe even next year as well, depending on demand. There may be many good reasons to invest in companies like Home Depot, Lowes, and lumber liquidators, but those are not the companies that are going to actually benefit from a surge in lumber prices. Why? Because they have to pay for those elevated lumber prices since they don't produce their own lumber. Many lumber companies are privately owned, but there are some publicly traded companies as well, such as West Fraser Group (WFG), Weyerhaeuser (WY), Canfor (CFPZF), Interfor (IFSPS), and Resolute Forest Products (RFP), to name a few. Each has their own pros and cons, but all of them are already seeing benefits from the surge in lumber in 2020 which was much lower than current prices. That being said, these companies' earnings will also be affected by the operations costs related to the other wood products they make such as wood pulp (which was low in 2020 but surging now), tissue, and newsprint/paper (which tanked in 2020 due to the pandemic). Some of these companies may also have some of their earnings weighed down by other costs, from debt they accrued during 2019 and 2020 when lumber was historically low or depreciating assets (common for the industry) which can be a big drag on non-adjusted earnings even though these actually don't result in any lost cash flow. Also, some of these companies are not traded on NYSE so you have to buy OTC shares if you want to invest in them in the US exchanges. So you need to do your DD in deciding which, if any, of these companies are worthwhile, undervalued or fit your investment strategy. While I have my own guesses on which may be the better value play for 2021, that's not the purpose of this post. I'm not here to pump and dump. I am just tired of seeing talking heads/shills in mainstream financial media promote the same stocks that actually have no ability to benefit from lumber's surge. If anyone's interested, I'll share my position and the reasons for it. I don't trade options so I have no clue how these companies would fit into various option strategies. Also, I am not an industry insider or financial analyst. Note: I had a bunch links so you could easily verify all of this but the auto-moderator kept blocking the post and I'm over it. [link] [comments]  |
| Potential lose decade coming: Where to hide Posted: 27 Feb 2021 12:53 PM PST Having lived through a few bear markets, wanted to share how I'm positioning myself for future headwinds:
In light of this, I present where I am focusing my equity allocation:
Climate Change Value While I would love to invest entirely in core renewables (wind, batteries, solar), I hate to say that I cannot do so due to their present valuations. Instead, I would like to point out a few sectors that are under appreciated:
My utility picks: AEP (top pick), AEE, AES, EXC, DTE, CMS. Avoid companies with wildfire risk or a politically unfriendly atmosphere. My reinsurance picks: RNR, Y My natural gas picks: WMB, NI My food picks: INGR, SAFM, CALM
Anti-Growth What is "anti-growth"? Stocks in industries that are shrinking. Why anyone would want to hold one of these, it's simply because of limited downside IF we are in fact in a valuation bubble. The game is to bleed these companies out for their last remaining dividends. Example: if a company has a half-life of 15 years, but dividend pays out 8%..you still come out decently ahead even if NAV shrinks 50% over that time. It's a bonus if the company can turn around their boat from decline to growth but not necessary. My picks: Tobacco industry (MO, PM, BTI), health retail (WBA, CVS), mid-stream oil transport (MMP, ENB, TRP).
Emerging Markets This has potential to be the long term money maker. Let's face it however...emerging market and especially China accounting standards are trash. They lie, and they do not consider it cheating, they think they are being "clever". This is not all too different from where the US was many years ago however. I'm betting that as emerging markets continue to develop, then there should also be small yet steady improvements in their accounting standards, transparency, and valuations. This will require time and patience. My ETF picks:
Conflict Hedge China represents roughly half of the Emerging Market portfolio. With Chinese exports equal to about 7% of US GDP, any conflict is extremely unlikely, yet with so much $$$ invested in non-free countries, I am obliged to hedge my bets with a few holdings that will do well in the case of a Cold War 2 or Taiwan-China conflict. My rule of thumb is $1 of conflict hedge for every $5 in China exposure. Individual stock picks are my preference of choice here.
My picks: LMT, NOC, LHX, EAF
Developed Ex-US Markets Provides some insulation from US stock valuations and future corporate tax increases. Europe in particular gets to play neutral in any future US vs China disputes. ETF picks: VEA as core. AVDV for a small value tilt. Individual picks: I've got a few big bets on UK healthcare companies that are hurting due to Covid fallout. SNN in particular makes about 1/3 of their revenue in sports medicine and they have been reeling.
A special note on max draw downs and risk. When there is a market crash, EVERYTHING goes down. This portfolio will not evade that. Frankly, I don't care about another 2008 or 2020 crash event (30-60% crash) so long as it recovers within a 10 year time frame. My objective is to reduce the probability of a lost decade(s) ala Japan 1990-2010, or a loss that is not recoverable at all. All that said...no promises. I am not a financial advisor, so I must say that this is not financial advice. This is simply how I am investing my money currently, and even so it only represents my "risk-on" portion of my savings. I have the other half of my savings in relatively riskless assets (FDIC insured CDs, etc.) or lower risk assets (low duration bonds). Please do your own due diligence.
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| Posted: 27 Feb 2021 05:22 AM PST This is a good video if you think you want to invest in ARK funds. There have been plenty of funds that did at some point did well. The question is if they continue to do so. What does history and the academic research tell us about such funds?
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| How to leverage your portfolio if you believe a market drop incoming Posted: 27 Feb 2021 06:30 AM PST Hey guys. Just wanted to share some of my thoughts over the past two weeks. I think it's very clear the fear indicator is ticking up week by week of an impending crash. Does it make sense? Of course, valuations at an all time high and some companies are definitely profiting more then ever, but many are not. Now for the stocks I own, I am definitely a long term holder. This past week my portfolio would've dropped roughly 5% or so had I not leveraged it with (Sqqq) calls. SQQQ is essentially suppose to be a 3x mirror inverse of the NASDAQ, which are a lot of the crazy ballooned tech companies. So food for thought for any of you guys, if you think a crash is coming maybe leverage it with some sort of put action. What I would NOT do - do not sell your long term stocks if a drop starts coming because you'll inevitably sell at the wrong time and we don't know when/if the market is going to crash. I just happen to think it is sooner rather than later, or at least a solid 10-20% correction. Disclaimer - I'm not a financial advisor but sharing my thoughts on the immediate future. [link] [comments]  |
| Severely undervalued weed play IMO - $CLVR Posted: 27 Feb 2021 08:40 AM PST Dare I say there is any undervalued weed stock? $CLVR ? Hello refined reddit investor community … I come to you with my first reddit DD. (posted a week ago but pulled it) Love the ones I find on here, but am usually too busy trading or too ADD to write my own. I'm sure many of you might have heard of this company already… its a weed play but has not shown up on the WSB apes' radar yet. This will be my first weed play because I have stayed away from the other companies due to hype and not being able to get in at a price I liked. The play… $CLVR, Clever leaves. I will try to keep this short and sweet. CLVR Price at authorship: $13.20. Market Cap: $151 mil (less than half the cash they have on hand) APHA $17.84. Market Cap: $5.6 bil TLRY $24.36. Market Cap: $4.2 bil Run up since Dec ~35% but now back to about even, TRYL and APHA ~%400+ - Colombia supposed to finalize legislation this week allowing for flower export.
- Focused on the much larger, more regulated markets of EU and Brazil, where there is a lot less competition. (US and CA 360 mil population/ 2400 licensed growers, vs 950mil pop 50 growers) -$82 mil in cash, $35 mil in debt.
-Products have been widely accepted in more than 15 different countries across five continents. -Partnered with The Herbal Brands portfolio brands that sell in over 20,000 retail locations across the United States -Partnership with TruSource Hemp Group LLC, leading provider of services for the Hemp Industry to include bulk wholesale, consulting, marketing, business positioning and futures analytics. Industrial scale supplier of Hemp Biomass and Full Spectrum CBD oil. Investor presentation: A lot of unknowns here due to a quarterly report not being provided yet and exports truly just starting to gain steam. I'm going mostly off square footage, cost of production, market reach and market cap here so far. I imagine their market cap to hit at least $1 billion with the blink of an eye which is about 6x from now. I'm personally going to be actively managing long dated calls, and have 375 shares. Seems like an early mover in international market that is a super legit vertically integrated operation… check out their website and presentation above. Much love. This is not financial advice… I just like the stock [link] [comments]  |
| Futures vs ETFs - What's up with the performance differences Posted: 27 Feb 2021 04:48 PM PST I'm looking for ways to gain leverage with futures for my investments in U.S. stocks and U.S. Treasuries. I'm comfortable investing in S&P 500 Futures over the long-term because comparing it to the actual S&P 500 Index shows it has been remarkably similar. However, this isn't the case for U.S. treasuries. I've compared most of the bond ETFs against their futures counterpart and while some are similar, they aren't close enough trackers for my comfort - any idea why this is the case for treasury futures? See below links for the graph comparisons: S&P 500 Index (^GSPC) vs S&P 500 Futures (SP=F) IEI (3-7yr ETF) vs IEF (7-10yr ETF) vs ZN=F (10yr futures) vs ZF=F (5yr futures) [link] [comments]  |
| Why Forward and TTM PE ratios have become increasingly irrelevant in today's environment Posted: 28 Feb 2021 12:05 AM PST Forward PE ratios are not real- I'll start with forward PE because it is one of the most frustrating ratios. When you look at forward snp500 PE ratios on Yahoo finance or Macrotrends, you are comparing actual forward earnings, to estimated forward earnings. Here is a fun statistic, 80% of snp500 companies beat q4 2020 earnings. Let me emphasize this, **forward earnings are always wrong**. The deviation varies, but it is not the correct number. In this market condition, we are clearly in a phase where the market is pricing higher than expected 2021 earnings. This may be because of a faster than expected vaccine, more than expected stimulus, or maybe just irrationality… but it is expecting higher earnings. So when you are comparing historical forward PE to current, it's not correct. Lower interest rates- Yes, this is an obvious narrative that has been pushed by the bulls for months now, but it has some truth to it. Lower interest rates mean a lot of things for companies. They can take on new debt or refinance current debt for lower interest rates, which means more money to invest in themselves for growth, or return more cash flow back to shareholders. Lower interest rates also have an effect on buy and sell-side analyst price targets. When modeling a price target, many analysts use discounted cash flow models or equity risk premiums to discount forward earnings to a present value. When interest rates are lower, the risk-free rate is, obviously, lower, which equates to a lower equity risk premium, hence, a higher price target. What else do higher interest rates mean? More spending from the average consumer. More debt is taken out- which is seen by historically high inflation-adjusted margin in stocks and record new home sales - which leads to more spending, which trickles down to the bottom line for snp500 companies, making trailing twelve-month earnings pretty irrelevant. If comparing historical pe ratios was a science experiment then the price would be a plant, sunlight would be earnings. We would be comparing the growth of plants v sunlight. In this experiment, we would want to keep all other factors constant, like room temperature, time spent exposed to sunlight, amount of soil, etc. But in our funky, weird, irrational, science experiment we are changing the amount of soil (interest rates), and here is the funniest part, people call it investing. The makeup of the snp500 companies- Another good reason historical PE ratios really mean nothing is that the quality of earnings has been pretty dramatically increasing. Over the past 7 years, the FANG % share of the snp500 market cap has gone from about 3.5% to around 12%, adding about a 1.7 forward earnings difference attributable to the FANG names. But, even this does not tell the full story. A significant makeup of the snp500 market cap is high growth names- relative to the snp500 earnings growth- not mentioned in that last example. Examples are Tesla, Amazon, Visa, Disney, Nvidia, Mastercard, Paypal, etc… It's very easy to justify the snp500's rather rapid rise of P/E ratio over the last decade by just the quality of earnings. These large-cap companies are taking away business from small, not snp500 companies. Which is a large factor in why the economy suffered in 2020 but Q4 2020 earnings were positive Y/Y. Another key point is that P/E ratios do not tell the full story for many companies. Amazon trades at a 90 PE, Tesla trades at a 1000 PE, Nvidia trades at 70 PE, NFLX 80, PYPL 70. Why? Because they have pretty significant 5-year earnings growth rates. The rise of intangibles- Companies are increasingly being valued by assets not realized by GAAP metrics. Intangible assets are one of the reasons price to book value has been a horrible performer the past 10 years. Companies are increasingly spending money on certain technologies that are producing 0 cash flows but will produce serious amounts of cash flow in the future. Let me give a good example. Tesla CEO Elon Musk stated on the 2020 Q4 earnings call "We are in preliminary talks to license autopilot". Currently, autopilot is a free option producing 0 cash flow but has required significant CAPEX to create. We know this is an asset to Tesla and will create cash flow into the future. Autopilot, arguably, is producing earnings for the company right now, since it's a selling point on their main products. But this does not show up on any income statement or balance sheet. This is simply an example to show how GAAP metrics do not do justice to many companies. An example like this can be pulled out of almost any snp500 company. Stock buybacks- SNP500 company's buybacks basically fell through the floor in 2020. There is a quite obvious reason why this happened, a ton of uncertainty in the economy so companies temporarily suspended stock buybacks. As we all know, stock buybacks artificially increase EPS since the company is retiring shares, just like secondaries artificially decrease EPS since it's dilutionary. Stock buybacks are expected to not only pick up in 2021 but expected to accelerate to historical highs. Making TTM PE ratio's not telling the full story on stock prices. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS- This statement is a disclaimer on almost every, 10k, 10q, institutional note, and blog post. But investors seem to take that philosophy and throw it out the window when it comes to price ratios. If you had looked at historical earnings ratios in May 2009, you would have sold all your stocks and crawled under a rock. Since then we have missed the greatest bull market in history. If you would have looked at historical PE's in 2014, you would have said to yourself, the market is overvalued, I will sell and wait for a dip. Well, in that time, you would have to wait 4 years for a 20% decline and get this, you would be paying a 40% premium, not including dividends gained. A 20 PE ratio today does not mean it won't be 30 in the future. A number without context should mean 0 to you- One of the most well-known philosophies in investing is to not chase yield. A higher yield almost always means higher risk. If it didn't, everyone would be buying 10% dividend-yielding stocks, not realizing earnings have a higher risk of falling, or maybe debt payments are starting to drown the company, etc. And the same vice versa, nobody is selling Microsoft because it is paying a lower dividend relative to the snp500. MSFT is just a higher quality company with a lower payout ratio. This logic should be applied to PE ratios as well. A low PE ratio should almost be alarming. Stocks like Walgreens or Abbvie trade around 10x forward earnings while Microsoft and Apple trade at around 30x forward earnings. Does this mean we should go and sell MSFT and AAPL to buy WBA and ABBV because it's a 3x better deal based on pe? No. This is not financial advice saying to buy or sell any of these companies. I'm a fan of all 4 of these companies, I'm just making a point that not contextualizing why these companies have different earnings multiples leaves you ignorant of your investments. [link] [comments]  |
| YieldStreet Prism Fund Experience Posted: 27 Feb 2021 11:04 PM PST Has anybody used the YieldStreet Prism Fund? https://yieldstreetprismfund.com I've been looking into alternative investments and this fund caught my eye, but a few things gave me pause:
I currently do not plan on contributing but would love to hear anyone's experience! [link] [comments]  |
| Finding gems in the balance sheet Posted: 27 Feb 2021 11:19 AM PST I have often heard of great investors identifying gems in the balance sheet such as underfunded pensions, real estate that is valued at cost, massive cash reserves that are going unnoticed, and various other things. I have heard about these concepts from various accounting books and investing books. My question is do most of these individuals simply choose a particular company and just try to see if their balance sheet contains gems or do they have a sort of screener which makes them spot particular companies that might have gems. Are there companies that are better candidates for screening for undervalued gems in the balance sheet? I am assuming maybe if you know a company owns a lot of land or real estate buildings. I am also assuming these investors scout the newspapers for financial companies and keep up with the news. Do any of you know of any excellent resources that are dedicated to this and provide education on spotting these types of companies? [link] [comments]  |
| Posted: 27 Feb 2021 08:07 PM PST Hey all, was curious of everyone's thoughts on this. I am very much in the boglehead camp of investing which puts me almost 100% into VT personally. My question is, as a 23 year old with a very long time horizon, is allocating something like a 10% reit and 10% small value tilt to my portfolio something that may be worthwhile? I am very confident i can handle any extra volatility but not sure this kind of move would outperform VT long term. Given, no one can know for sure, but I'm just looking for opinions to help swing me one way or the other. [link] [comments]  |
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