Except Hong Kong announced a similar thing and BTC has been falling since. Hong Kong regulators approve spot bitcoin and ether ETFs (cnbc.com) I'm not well-versed in crypto so whilst I think it's a massive speculation, I'm not brave enough to short it.
I really think this bubble in equities is easy to avoid. Much easier than in the past. Large caps have been beneficiaries of fund flows and smaller stocks have been left behind. You don't need to buy puts or anything. There's plenty of value in this market. All you have to do is divert your attention from the insanity and keep buying the businesses that aren't subject to hype. Ok, your performance may suffer a little in short-term since there's little-to-no price discovery in these names, but over time, I'm sure you'll be proven right.
Now, it's true that in the past, buying small cap stocks when the general market was overvalued was a bad idea. But look at the S&P 500 (73% return exc dividends over the last 5y) vs the Russell 2000 (24% return exc dividends). And then compare that with the Nasdaq 100 (127% return exc dividends). I don't think a correction will be as severe in the small cap space.
Even outside of the small cap world, there's lots of value to be found. Maybe you have to look at more Graham-style businesses though.
Ok, so what stocks are easy shorts in this market, since this is a Bear thread as I'm often reminded? Simple P/E ratios and P/S ratios are sufficient here.
Well, there's GE Aero. This is an industrial trading at 40x FORWARD earnings and 2.5x LTM sales! (And sell side are cutting guidance...)
You want more insanity? I'll give you more. Eaton Corp (ETN) that is worth $125b on revenues of $23b. Ok, so revenues are growing right? Right? No. In the last decade, they've been flat. 40x LTM earnings seems about right for such a sexy business.
If we look outside the industrials sector, we can find more craziness.
In the tech industry (excluding the obvious AI high flyers), you have Nutanix at 7x sales and yet to make a profit. Ah, but analysts soak up their non-GAAP earnings. On average, their share count increases more than 5% annually...
If we move into the eatery business, you have Wingstop at 23x sales and 150x earnings. So reasonable. Shockingly, the CEO disposed of 40% of the shares he owned in February.
Ok, a solid business that could fall 50% and still be overvalued? FICO. YTD up 0% but in the last 5y up over 300%! 18x sales and 65x earnings. A fine business, sure, but way, way overvalued!
And there are many, many more overblown situations (PLTR etc).
If you really want to short the market, puts on the Nasdaq 100 is your best bet (to me). But you have to get both your timeframe and timing right. Too difficult for me, so I'll stick to buying value stocks and calling out individual companies. And my hunch is that the thread is still quite early. Imo, it's better to be sure we've peaked before taking an aggressive, defensive positions. At this point in time, it comes across as knee-jerk. Am happy to be proven wrong and I agree with most of what's being written. |
