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re: If you had to pick one stock for the next 18 years.
Posted on 6/5/16 at 8:04 pm to Grits N Shrimp
Posted on 6/5/16 at 8:04 pm to Grits N Shrimp
I would definitely not invest in FB or AMZN with an 18 year time horizon. Go back and look at what happened to tech investments made in the 90's with their high valuations. At some point PE compression is going to kill you. Everything has to go right for a long, long time for you to do well.
2
Posted on 6/5/16 at 8:51 pm to Crazy4OU
Amazon I admit Im a huge fan of as a company but not a stock but Facebook I get giddy about bc that thing is IMO the first trillion dollar company. Their dominance is second to none and theyre actually trading at something like 35x forward earnings nothing ridiculous like AMZN. Facebook literally is growing earnings at like 40%/year.These Tech companies are all profit. There arent factories,unions or tons of unskilled labor. Capex goes to developers. Eventually declining sharply as percent of revenue
Facebook is so simple if you think about it which is why its insane how big a monopoly the are. They are basically a simple code written by zuckerberg in his dorm room. Originally just a few lines of code definitely 5k or less. The only business I could think of that was simpler in design was probably ad words from google. Facebook could literally drop 90% of their employees today and still be immensely profitable think about that for a second, how many other companies can do that? They're not manufacturing much of anything you literally could probably keep 100 or less developers around and thats it running FB and Instagram. The profits they make today pale imo to what they will make in the future. Facebook is stealing googles ad revenue these days and really eating googles lunch if you look at the numbers.
PE is the wrong metric to look at with a growth company like facebook. You wanna look at PEG which is PE divided by growth. Anything under 1 is undervalued, even something like Under Armour that everyone loves is massively overvalued at 2+. FB has a forward p/e of around 35 and a growth rate for the next few years estimated to be over 40% making is disgustingly undervalued IMO. Then you've still got zuckerberg there which is huge, they're making big strides in oculus rift which they stole for $2B + augmented reality which imo is a monster in the making. You look at how big their moat is and the fantastic team software developers which seems like the only thing that creates any value these day and you have one of the best investments out there, certainly the best investment of the mega cap tech co imo.
Of course thats just my opinion
Facebook is so simple if you think about it which is why its insane how big a monopoly the are. They are basically a simple code written by zuckerberg in his dorm room. Originally just a few lines of code definitely 5k or less. The only business I could think of that was simpler in design was probably ad words from google. Facebook could literally drop 90% of their employees today and still be immensely profitable think about that for a second, how many other companies can do that? They're not manufacturing much of anything you literally could probably keep 100 or less developers around and thats it running FB and Instagram. The profits they make today pale imo to what they will make in the future. Facebook is stealing googles ad revenue these days and really eating googles lunch if you look at the numbers.
PE is the wrong metric to look at with a growth company like facebook. You wanna look at PEG which is PE divided by growth. Anything under 1 is undervalued, even something like Under Armour that everyone loves is massively overvalued at 2+. FB has a forward p/e of around 35 and a growth rate for the next few years estimated to be over 40% making is disgustingly undervalued IMO. Then you've still got zuckerberg there which is huge, they're making big strides in oculus rift which they stole for $2B + augmented reality which imo is a monster in the making. You look at how big their moat is and the fantastic team software developers which seems like the only thing that creates any value these day and you have one of the best investments out there, certainly the best investment of the mega cap tech co imo.
Of course thats just my opinion
Posted on 6/5/16 at 10:46 pm to LSUengineer12
Vail Resorts, MTN.
Massive barriers to entry and margin pricing power.
Massive barriers to entry and margin pricing power.
Posted on 6/5/16 at 10:51 pm to LSUengineer12
I think oil stocks are still good long term. XOM or maybe a more risky BP. Visa is a good option. I like RAI, Reynolds American, a tobacco company also.
Posted on 6/5/16 at 11:15 pm to barry
quote:
Also id buy them index funds if you want something for 18 years
This.
If you want to be more focused, then choose a sector fund or ETF. I would stay with tech. But trying to pick just one stock that will be a winner over the next 18 years would require picking the trends and most capable CEOs that will be able to play carpe diem the best. A good bit of what we're seeing in the tech sector now wasn't even imagined 10 years ago, much less 18-20 years ago. And I think we'll see more of the same (at an even faster rate) going forward.
Certainly not as sexy or exciting a strategy as picking the winning lottery ticket. But there's less risk and maybe even more reward in the more diversified approach.
It's a good thing that you're doing for the kiddies though.
Posted on 6/5/16 at 11:17 pm to dabigfella
Why did you mention pornhub possibly going public? Was that tongue in cheek? Now that is a business that will never die, and will only grow exponentially.
Posted on 6/5/16 at 11:25 pm to Joshjrn
quote:
Can you really not conceive of a single scenario in which one of those companies doesn't exist in fifty years?
I cannot see a scenario where Amazon doesn't exist in 18 yaers like OP stated. Google for the most part is in there but so much is dependent on marketing revenues that it causes concern
quote:
I would definitely not invest in FB or AMZN with an 18 year time horizon. Go back and look at what happened to tech investments made in the 90's with their high valuations. At some point PE compression is going to kill you.
Amazon isn't a tech company, it is Walmart on steroids. They are like the weeds in my backyard, slow growing in every part and inevitably going to take over.
More importantly, the P/E isn't killing Amazon in the slightest as Amazon isn't trying to earn P/E. If they wanted to, they could easily drop to 10-25 P/E, but it would sacrifice growth and market share as they are trying to dominate
This post was edited on 6/5/16 at 11:31 pm
Posted on 6/5/16 at 11:26 pm to LSUneaux
My 3 biggest holdings are Apple, Facebook and Visa. Sticking with all 3 long term!! Have huge profits in each already!!
Posted on 6/6/16 at 7:27 am to LSUengineer12
Tsla
Posted on 6/6/16 at 7:42 am to GenesChin
Go and look how investors did that bought Microsoft, AOL, Cisco, Intel, etc. at the height of the tech bubble in the 90's. A lot of them are still showing a loss 16 years later from buying an over valued stock. It's not a matter or if but rather when the PE compression will bring it down.
I think Amazon is a great company that is going to continue to grow. I also think at some point the government is going to get involved.
The next time we have a market downturn Facebook is going to get killed. They make most of their money from advertising and that will be one of the first things companies cut back on.
Investing long term in individual tech stocks is not generally a great recipe for success. It's too easy for someone to create a better mousetrap.
I think Amazon is a great company that is going to continue to grow. I also think at some point the government is going to get involved.
The next time we have a market downturn Facebook is going to get killed. They make most of their money from advertising and that will be one of the first things companies cut back on.
Investing long term in individual tech stocks is not generally a great recipe for success. It's too easy for someone to create a better mousetrap.
Posted on 6/6/16 at 7:48 am to Crazy4OU
quote:
I would definitely not invest in FB or AMZN with an 18 year time horizon
I'm with you on fb but your nuts with amazon. like the other guy said, they are walmart on steroids. the stock might be overvalued and not have the best technicals, but as a company they are taking over the world.
my largest single holding is apple, but thats definitely a stock i don't want to hold for 18 years. think microsoft circa 2000. tech comes and goes.
i also like starbucks for a long term hold, i can't see them going anywhere.
agree with others on big oil.
This post was edited on 6/6/16 at 7:57 am
Posted on 6/6/16 at 8:02 am to 632627
See everyone says Apple is so risky bc they're not innovating, honestly Apple is perfection its beautiful to watch. Id rather them not grow and just keep minting cash honestly, bc their revenues and profits are just incredible right now. The key to our parents generation getting wealthy was high dividends combined with low P/E. Even if you load starbucks at 35x earnings and 1% dividend, reinvested dividends wont do much for you, but Apple at 9-10x earnings with a 2.4% dividend which they can grow by leaps and bounds for years to come if they quit making money tomorrow, is something to behold.
The street likes google and all their moonshots, and yes google is a fascinating company, but google has to deal with advertising headwinds from Facebook and as another poster mentioned, the overall ad budgets being cut in another recession. People say apple is a one trick pony but google isnt far behind, its mostly adwords, android has giant market share and whatnot, but its just not as immensely profitable, but yes its the operating system of the world.IOS on the otherhand has all the customers with disposable income which is what matters as we move forward. Most with iphones love them, I havent had a different phone since 2007, I switched to a samsung Note 3 when apple didnt have the big screen yet, and in 3 days returned it and got an Iphone again, the samsung just felt cheap and I just liked IOS.
Apple is slowly creeping into enterprise with recent deals with IBM and SAP, and their global market share is still small, obviously with such pricey products I dont expect global dominance but Apple is just a more friendly user experience in whatever they do and Im sure some haters will bash it, but Apple may be just an Iphone company, but our phones today control our whole lives, in 2001 I had a flip phone and never did anything with it, today my Iphone 6 is my connection to the world to get news,conduct business, etc. Its an amazing device and apple is firing on all cylinders.
Like I said if apple with $200B+ in cash is in trouble, then god help every other tech co on earth without that cash hoard. If apple really is getting into cars by 2020 or whatnot, obviously lots of people say apple car will suck, but to this day, an apple product hasn't let me down as a user and with all the cash they have, they could do what Tesla is doing on a much larger scale fairly easily if they wanted to. Visa I was one of the first to mention why I liked it a few years ago, but as much as I like it today, I have a hard time believing apple,google, or some other tech company couldn't destroy visa with relative ease bc Visa fees are steep and I could see someone trying to undercut them somehow.
The bottom line with apple is with the cash hoard they have, they can sit back, keep printing cash today and whenever the next big sector in tech takes off, whatever it may be, apple can easily dive in, copy it, if they dont just create it, and with their ecosystem print money at higher margins than anyone else. They didn't create the first mp3 player,laptop,desktop,cell phone......they perfected all of them
The street likes google and all their moonshots, and yes google is a fascinating company, but google has to deal with advertising headwinds from Facebook and as another poster mentioned, the overall ad budgets being cut in another recession. People say apple is a one trick pony but google isnt far behind, its mostly adwords, android has giant market share and whatnot, but its just not as immensely profitable, but yes its the operating system of the world.IOS on the otherhand has all the customers with disposable income which is what matters as we move forward. Most with iphones love them, I havent had a different phone since 2007, I switched to a samsung Note 3 when apple didnt have the big screen yet, and in 3 days returned it and got an Iphone again, the samsung just felt cheap and I just liked IOS.
Apple is slowly creeping into enterprise with recent deals with IBM and SAP, and their global market share is still small, obviously with such pricey products I dont expect global dominance but Apple is just a more friendly user experience in whatever they do and Im sure some haters will bash it, but Apple may be just an Iphone company, but our phones today control our whole lives, in 2001 I had a flip phone and never did anything with it, today my Iphone 6 is my connection to the world to get news,conduct business, etc. Its an amazing device and apple is firing on all cylinders.
Like I said if apple with $200B+ in cash is in trouble, then god help every other tech co on earth without that cash hoard. If apple really is getting into cars by 2020 or whatnot, obviously lots of people say apple car will suck, but to this day, an apple product hasn't let me down as a user and with all the cash they have, they could do what Tesla is doing on a much larger scale fairly easily if they wanted to. Visa I was one of the first to mention why I liked it a few years ago, but as much as I like it today, I have a hard time believing apple,google, or some other tech company couldn't destroy visa with relative ease bc Visa fees are steep and I could see someone trying to undercut them somehow.
The bottom line with apple is with the cash hoard they have, they can sit back, keep printing cash today and whenever the next big sector in tech takes off, whatever it may be, apple can easily dive in, copy it, if they dont just create it, and with their ecosystem print money at higher margins than anyone else. They didn't create the first mp3 player,laptop,desktop,cell phone......they perfected all of them
This post was edited on 6/6/16 at 8:07 am
Posted on 6/6/16 at 8:09 am to dabigfella
I agree with you dabigfella. I would feel much more comfortable investing in Apple for the next 20 years than Amazon or FB. The expectations are really low and they don't have to do anything exceptional for you to get a good return. For Amazon and FB they have to continue to meet or exceed expectations for the next 20 years for you to not lose a bunch of money.
Posted on 6/6/16 at 8:11 am to 632627
I'm much more skeptical of FB long term than Google or Amazon. Facebook's demographics concern me as the platform loses its edge and it gets older. Instagram was a great purchase but it will also fade at some point. Snapchat is amazingly popular right now. Teens and young adults are rapid to move from one platform to another and I fear that FB gets left in the dust if it does not acquire each trend when it happens. The Instagram purchase was a great decision.
Amazon rides the wave of ecommerce growth. No one is positioned like them and they do not have the same risk profile of a typical tech company. AWS isn't going anywhere and will be a profit machine and the consumer facing storefront will steadily grow without a hitch.
Amazon isn't even competiting in a serious way in some massive markets, most notably grocery. I think this alone pushes Amazon to new heights in the next decade. People will quite literally stop going to the grocery store and have everything they need delivered directly to their doorstep. It is a revolution in that industry and it is a fledgling right now.
Amazon rides the wave of ecommerce growth. No one is positioned like them and they do not have the same risk profile of a typical tech company. AWS isn't going anywhere and will be a profit machine and the consumer facing storefront will steadily grow without a hitch.
Amazon isn't even competiting in a serious way in some massive markets, most notably grocery. I think this alone pushes Amazon to new heights in the next decade. People will quite literally stop going to the grocery store and have everything they need delivered directly to their doorstep. It is a revolution in that industry and it is a fledgling right now.
This post was edited on 6/6/16 at 8:13 am
Posted on 6/6/16 at 8:15 am to lynxcat
Unless amazon gets directly into the grocery business itself which is a low margin business there are services like instacart that are $99/yr that will allow delivery from whole foods for the same price as in store. I use instacart and its awesome. Amazon could easily strike a deal with these big grocers and undercut instacart as well, but I will say the problem is it sucks when you pay $6 for some organic blueberries and you get a box where half are ruined, grocery shopping is something you really need to do in person.
Posted on 6/6/16 at 8:35 am to dabigfella
quote:
Unless amazon gets directly into the grocery business itself which is a low margin business there are services like instacart that are $99/yr that will allow delivery from whole foods for the same price as in store
Amazon's historical record is to buy "awesome" companies that can beat them. They did it with Diapers.com, WOOT!, zappos etc
quote:
Go and look how investors did that bought Microsoft, AOL, Cisco, Intel, etc. at the height of the tech bubble in the 90's
Amazon isn't a tech company, so not sure how this comparison is relevant.
quote:
It's not a matter or if but rather when the PE compression will bring it down.
Amazon could support a P/E of 10-15 right now at current valuations easily is my argument but purposely choose not to show profit. Jeff Bezos is just a genius at operating a massive growth company. Once you consistently report profits and get a "P/E" you are a slave to it.
quote:
I think Amazon is a great company that is going to continue to grow. I also think at some point the government is going to get involved.
Amazon is trying to get their hands in every cookie jar. Would be near impossible to say that they are a "monopoly" without saying "Amazon monopolized every market"
Also, the consumer surplus is so large on top of general approval for Amazon, the outrage would be a huge deterrent for public officials to pursue it
This post was edited on 6/6/16 at 8:37 am
Posted on 6/6/16 at 8:58 am to GenesChin
To answer the OP's question, if I can only invest in 1 stock for the next 18 years it will be Amazon, closely followed by Under Armor.
Posted on 6/6/16 at 9:00 am to JamalSanders
quote:
closely followed by Under Armor.
My only concern with UA is how fickle the apparel market is.
Posted on 6/6/16 at 9:21 am to GenesChin
i just have a hard time fighting a trend of every major sport MVP being on board with UA from Steph to Bryce to Cam then Spieth thats a monster to wrap your head around when you think todays youth and their idols growing up.
Posted on 6/6/16 at 9:40 am to dabigfella
quote:
i just have a hard time fighting a trend of every major sport MVP being on board with UA from Steph to Bryce to Cam then Spieth thats a monster to wrap your head around when you think todays youth and their idols growing up.
Oh, I am definitely on board with that logic. I'm going to pick up a sizable portion of UA this week. I don't feel comfortable betting on a company to have 18 years of sustained growth in sports apparel is all.
Amazon for example is in a straightforward business. They sustain and grow on efficiency for the most part. I understand that and recognize what they are doing to improve those areas
This post was edited on 6/6/16 at 9:42 am
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