The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
You and everyone else are currently looking at the next NFLX like earnings play. One think is for sure, tech earnings will be volatile and results at the tail end will be more likely then usual. Tail ends are usually hard to predict and the statistic models that calculate premiums usually underestimate them. So it might be the best time to steal from the a gang.
That said, I think weāll see two types of tech ER scenarios going forward. Type 1 will be the NFLX repeat, taking everyone by surprise. More likely will be type 2, everyone is getting scared and the stock tanks before ER and goes up after.
Next week we have reports after hour from:
Tuesday MSFT
P/E is 33.11
I think this will be type 2
Wednesday TSLA
Thatās where it gets real interesting.
Tesla P/E is an astronomical 306, everyone expects a super bullish Tesla ER, the slightest hint at growth problems and it might tank spectacularly. I think this could be a type 1.
This high P/E provided the reason for the CEO to dump $20 billion dollars worth of stock in the last 90 days.
Thursday AAPL, V
P/E 28 most likely is going to be a type 2, Q4 is really strong quarter usually for them
VISA P/E 36.6
Visa is down 11% from July ATH. Not likely to have an outstanding earnings but who knows.
Fear and greed is what fuels the algorithms that provide 87% of the market volume in 2022
Donāt overthink this stuff.
I think most of them are down to short positions or paid by hedge funds to spread FUD.
The outlook for 2022 is not as good as 2021 but companies are still generating record earnings. The UK economy is growing not contracting (recession) so these guys are not basing their predictions on even the most basic economics.
The point is not to let them dictate your investment decisions. Do not short and do not use leverageā¦..have patience and you will have the highest probability of making money. Choose companies that generate consistent revenue, will still exist in 5 - 10 years time and get them while they are hot (buy dip).
This is not to say that the market wonāt have temporary downturns, it will and thatās a healthy part of its function but see it as a buying opportunity not a panic selling event fuelled by social media FUD. Letting FUD guide your decision is how you loose money in this game.
I have no doubt there will be a major correction but only when volume increases with new buyers.
I was looking into their financials they average over $5-6 billion in revenue per quarter. Now the pandemic definitely hurt their numbers but according to market watch theyāre still completely on track.
Their total debt actually shrunk last quarter from 41b to 34b, liabilities from 16b to 13b, and their total accounts receivable only shrunk by a small margin in comparison.
They charge clients on a per-mile-flown basis so these numbers tell me that even during the pandemic they were still resilient enough to make close to their average revenue.
Their inventory continues to fluctuate at a healthy rate.
They laid off 1400 employees in November last year and just culled another 9000 employees from their global workforce. These kinds of cuts could be good or bad.
If their revenue was much much worse I would easily conclude the more likely scenario they are failing and flailing, but with their revenue still on-par with pre COVID returns, it seems highly possible that this is a smart practice of ātrimming the fatā from their corporation.
Many jobs can be replaced with new online tools (SaaS) and other means of automation.
I think Rolls Royce has finally realised this and is preparing for an overhaul on every level.
While this company is not an airline, it is still the second largest turbofan manufacturer in the world rivalled only by GE. Pre-pandemic shares were trading at Ā£10 now down to Ā£1+ Despite their earnings not being as heavily impacted as some other companies like British Airways, EasyJet, and others weāve seen make a decent recovery from the pandemicās toll.
I feel like this stock is being neglected for multiple reasons, the dumbest of which being people think itās the company that makes Ā£500.000 that not many people own.
Glad to hear your opinions and I hope Iām missing something, if so please let me know why people seem to hate this stock so much!