The latest Investing Matters Podcast episode featuring financial educator and author Jared Dillian has been released. Listen here.
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Baffled
“I predict that a market correction will devastate some fairy tale stocks while solid, predictable, boring, unremarkable shares survive.”
The situation now isn’t too dissimilar to the dotcom era. The major diffence now is that valuable companies are hugely overvalued, whereas in the dotcom era worthless companies were trading on obscene valuations.
Back then any stocks with solid fundamentals paying dividends were derided as old-economy stocks and shunned by investors in favor of worthless dotcom trash.
Once again the market has decimated value stocks. The question is - will these beaten down stocks also fall when techs crash?
My guess is that they will in the beginning of a sell-off, but when the smart money starts to buy, value stocks will benefit. Any rebalancing of growth/value ratios in global markets will be swift. It’ll happen in weeks rather than months.
Techs can’t go on growing at previous levels forever. I understand some of the tech giants are among the world’s best companies but that doesn’t mean investors should pay 2/3 times their intrinsic value.
Papucel you and I are in agreement. The recent dramatic increase in rates on 10 and 30 US bonds and a poor 7 year auction, plus comments by politicians, central bankers, and investors suggest that interest rate increases are possible. The economic landscape is sclerotic and geared towards a zero interest rate horizon. The risk of an interest rate rise is fundamentally under priced. A few clicks up and the whole edifice begins to wobble which will slow down fast money and preface a rotation out of growth back to value. I also see a big opportunity for Gold although IRs are kryptonite to PMs. It all depends on the levels of fear and inflation. Gold's fall over the past 6 months while Bitcoin soared to nearly $60,000 is pure lunacy and indicates bubble territory. A rubber dingy would have been a valuable commodity aboard RMS Titanic but who had the foresight to pack one?
Baff
"I predict that a market correction will devastate some fairy tale stocks while solid, predictable, boring, unremarkable shares survive."
I gave a lot of thought to the market correction impact of on AZN, SSK and BAE. The question is what would it be the catalyst of the market correction, would it be due to a Treasury yield increase or the traders realisation that no more money could be made by being stacked in high SP's.
If it is the former that it will be a capital outflow from high SP to bonds, with the effect you mention, BUT if it is the later then the traders will look to forge synthetic volatility moving money from the unreasonable high SP into the undervalued SP to normalise them with the opposite effect raising AZN, GSK, BAE.
IMO
CSDI your market perspective is comprehensive. We are all placing bets in a game of chance. A quote attributed to Mark Twain and Yogi Berra says it all,"making predictions is difficult, particularly about the future." Personally I see the Risk vs Reward asymmetry favouring the upside for this stock, not withstanding macro level falls. I sold previously at £16 and see a good company in a good sector, able to weather the Covid storm, capable of paying dividends, with strong revenue streams globally, within a market driven by acquisitions, preparing to demerge, trading at a 25% discount. How many GSKs would it cost to buy a Tesla? What is GSK worth relative to JustEats or Rightmove? The sun still rises in the east and sets in the west regardless of all the pabulum and stock price propaganda employed to bamboozle credulous dreamers. I predict that a market correction will devastate some fairy tale stocks while solid, predictable, boring, unremarkable shares survive.
1. If I could predict the future, I would not have bought GSK 6 months ago !
2. The directors will get richer whether the share goes up or down
3. TBH, no one "knows" the future. To quote Peter Lynch:
Stocks either go up, or go down (more quickly) .
4. For short term traders, it's a 50/50 bet and there are many more losers than winners.
5. For LTH (investors) it is a risk reward calculation.
So for GSK, this is the best opportunity we have had for many years.
I am overweight at 17% of p/f, and down approx 15% to date at average cost 1460; and after counting divis averaged 40p per share held.
But as PL also said "Just 'cos stocks have fallen already, does not mean they cannot go lower; and vice versa.
Yours truly - C S D I (Crap Share Dealing Ideas) has no idea
PS. My prediction is GSK will get back to £16 eventually, and I will trade the quarterly dividends until then, reducing my allocation as SP increases in stages , starting at 1350 then 1500, 1550 !
I need a brighter mind than mine to suggest -How to manage the position if SP continues to decline.