Thanks for your input Paul Sr, Madharry & JohnyP!
@Paul (mainly) :
Every other stock you look at that does not fit your criteria, you just pass on. And this might work out ok for you.
I am actively trying to pass on more, actually –– I have way too many different ones already... (>100)
you are passing on a company that is huge and growing at 30% or so Yes, and that is actually one of the reasons why –– when a company is that huge, how long can such a growth rate be maintained? Arithmetics don't allow for it long enough to warrant PE (OTOH). At the very least, it becomes increasingly harder.
Also, looking closer at FAANG P/FCF's, all are > 30. One must distinguish between good cash flow for co., and good FCF for stock, right?
Or just dismiss the apparently wonderful business To me, it's not an apparently wonderful business. I'm sure it is, judging by the enthusiasm of investors like yourself and others here. But again, I don't really understand what it is that they do, and try to keep away from such situations (in keeping with Buffett/Munger, I might add!)
It is more important not to lose money, than it is to make money. This I profoundly believe, especially now when froth and fraud is rampant. Although, since I'm in my mid 20's, I'm prepared to take much risk in a small part of my portfolio, as long as it is well covered by other safe holdings. Thus I prefer to have most of my money in very safe tangible stocks, and a smaller part dedicated to speculation/trading (subscription warrants, IPOs) – and then my "insurance" positions (my puts, that is, which is something imbetween/combination/best of both worlds). BABA doesn't fit into either camp for me.
I'm surprised though that for a person who reads so much about investing, that you missed something right before your eyes - AAPL. Literally the screen right before your eyes. "Literally the screen right before your eyes" That had me laughing :') Shows how blind one can be sometimes, eh? Maybe I read too much...
I seldom see great growth stories, and don't pride myself in being able to spot them before everyone else does. I also think hindsight bias makes it looks easier than it is, and ourselves as being better at doing it than we really are. E.g., I started noticing Tesla's all over the place in March. With very simplified Lynch reasoning, I could've bought the stock based on that, given that it was down 50% from pre-covid. Would I have, realistically? No. I still thought the stock was in a bubble, and overpriced (which it of course has always been, relative to conservative valuation methods.) And covid of course made downsides feel more palpable too. It's easy to forget that FAANG's and other glamour stocks seemed extremely expensive already before covid. Now they almost seem cheap, and boring compared to the meme stocks...
But this one (AAPL) I'd like to think I would've spotted, had I begun investing a little earlier. Only really discovered stocks in winter 2017/18, and had no idea what I was doing before i found Graham autumn 2019 and started diving deep during 2020. With hindsight, should've picked up some AAPL in March... Thought never struck me, amazingly enough. Which tells you something about my ability to imitate Buffett... (Although I bought Twitter on similar grounds during summer; however, sold way too early I'm afraid, since I am still not comfortable with these kinds of stocks, and holding to moons, and all the angst that that entails for me. I seem to be cut out to do the opposite. (Buy cigar butts, etc.) However, going forward, I will try to better myself here. There may be a time for buying growth soon; however it seems like a bad idea to start at these prices. Right now is the time for old school, boring value à la Graham, IMO, maybe with a Klarman/Burry twist. (Also, going short the general market via puts seems to me to be about as obvs an idea as buying AAPL in 2009, as I have outlined before. But not many are comfortable going outright against the market, unfortunately! All the better for me... I guess it's an 'edge' of sorts.) But everyone is playing the Buffett/Lynch game presently; others do it way better, I'll leave it to them.
My opinion is that if you could come to see these as possible opportunities, focus on them Absolutely. Especially when I (hopefully) outgrow the NCAV investing style because of size, and maybe have less time to dedicate to investments, I'll hope to become better at simply buying great businesses at fair prices and holding them *forever*. Right now, however, when so much money is chasing those stories, it seems like a difficult endeavor IMO. Buy and hold is almost a bubble once again, as in every bubble. As Burry once wrote on this thread: “Buy and hold becomes mantra at the end of a bull market. Buy and hold becomes anathema at the end of a bear market.”
Sorry for always writing such long posts...
Good fortune to all,
petal |
