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Strategies & Market Trends : Value Investing
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To: Paul Senior who wrote (57644)7/31/2016 7:29:19 AM
From: Graham Osborn  Read Replies (1) of 78708
 
Thanks Paul. I like to buy a stock for at least 3 different semi-independent reasons. GOOGL falls in the "equity-bond" category. I did a calculation 2 years ago which generated results qualitatively similar to yours using the equity-bond method. Nowadays I don't typically use that method since it assumes stable or declining yields on high-grade corporates so I will have to see how the valuation comes out using the comps + MOS method. That's #1 (potentially). #2, there is an implicit yield through retained earnings which GOOGL unquestionably has, and unlike some of the utilities/ consumer staples/ oil majors it could easily afford a dividend without external financing. #3, there's the aspect of inflation protection. So long as GOOGL can dominate the mobile space as it does the PC space, it will have considerable pricing power if we do enter a hyperinflationary phase as a result of expansive monetization. Related, it should continue to have pricing power in a recession and has excellent credit should it be needed. #4 is technical - enough said.

I don't hedge anymore. I did some last year but stopped. Now every position is directional. In order for a position to be a "hedge" it needs to offset some other position such that neither position would make sense independently. It is an incidental fact that a well-diversified portfolio of positions with directional merit may display some hedging properties.
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