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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Paul Senior who wrote (57644)	7/31/2016 7:29:19 AM
From: Graham Osborn	Read Replies (1) \| Respond to of 78715

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.

To: Paul Senior who wrote (57644)	7/31/2016 5:32:27 PM
From: Graham Osborn	Read Replies (1) \| Respond to of 78715

FWIW, I'm not seeing much value in the other FANG stocks. AMZN sells at 33x tbook vs 5x for GOOGL. FB sells at 12x, NFLX at 16. NFLX has the weakest moat IMO. It's not a true tech company like the others. These are not the sort of stocks Graham or Buffett would buy IMO, or that I would put in my mom's IRA. Maybe a better acronym would be FANdanGo ;) FB could be another GOOGL in 5-10 years, and I'll happily buy some when I can get it at 20-30x unlevered earnings, so long as Zuck is still around. But FB has nowhere near the moat of GOOGL IMO, although they're moving in that direction. The aggregate value of the data GOOGL has collected about the world's population has vast untapped value, much as the Standard Empire did before its breakup/ IPOs due to the Roosevelt antitrust suit. Think about how much time you spend on GOOGL vs FB/ affiliated apps in a day.