by Travis Johnson, Stock Gumshoe | April 12, 2019 7:01 am
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Curious what your list of buys would look like in a large market downturn….assuming you can convince yourself to dive in lol
The ones I’ve never bought are trickier, because you have to be comfortable enough with the company to overcome the pessimism that will be reigning at some point about their future (or the economy’s future), but hopefully the ones I already own or have owned will be easier — Berkshire, Markel, several REITs, Hershey come to mind.
I’ll try to think about a list I could share, but if other folks have suggestions please toss them on the pile.
Maybe $BR Broadridge? Wish I had bought some when I started thinking about them around the $90 mark. I starting liking them as an established big name that has a lot to gain with the onset of blockchain boosts to processing heavy sectors.
Thanks for your articles. Always enjoy them. It’s not too late to add a little MDB to your portfolio. Up 50% since last ER, about 400% in a year, strong growth forecast, and still represent a very small percent of a $60B TAM. Lexagene and Quantum Materials are interesting specs. Good luck.
Fwiw, mktx, goog, msft, adbe, pypl, visa, amzn, nflx, pro, ttd, avb, tmo, CSU.to. I’d throw unh on there but think you can buy that today.
Priority for me would be Inverse ETFs, soon followed by consumer defensive and utility stocks or other stocks with Beta less than 1.0. I’d hold off on big-name tech stocks until institutional short sellers (both human AND robotic) who come out of the woodwork during an economic downturn are done covering their shorts.
Extraordinary morning for Disney (DIS) today! It’s a little shocking to see a behemoth like Disney jump 10% at the open, following news that pretty much everybody already knew was coming.
The details of Disney+ were a little clearer and more appealing than investors had been hoping, I guess, including some really compelling content from both Fox and Disney and the clarification of which of the blockbuster films will immediately be on Disney+ (and often exclusive on Disney+), along with some likely hits in the form of exclusive series’ from the Marvel and Star Wars universes.
What was probably most exciting for analysts, though, was that Disney put a target on their subscriber growth… a pretty bold move to make six months before the product is even available for purchase. The projection was for 60-90 million subscribers by 2024 (1/3 US, 2/3 international), and that’s also roughly when they expect Disney+ to start covering its costs (which will be massive, both in technology and content) and making a profit…. which was more than analysts were penciling in, apparently. Netflix, by way of comparison, has about 140 million subscribers. Given Disney’s unique content and overwhelming dominance at the box office, and the fact that we’re clearly moving toward a “rent, down own” world in all forms of media, I wouldn’t be shocked if the subscriber growth for Disney is even faster than that.
60 million subscribers at $6.99/month is just over $5 billion a year. That’s not a big deal for Disney, and they can absorb the tens of billions of dollars of investment required to get to that point in five years (current profit at DIS is about $11 billion/year, and they could easily add to their debt balance without it being onerous). If that kind of growth got a similar valuation to what Netflix (NFLX) had at a similar size a few years ago (it most likely won’t, but one can dream), then the streaming service alone could be worth $25-35 billion (at 5X sales). Netflix crossed 60 million subscribers in 2014, also with roughly a 1/3 US, 2/3 international base at that time, and they got there by roughly doubling the subscriber count every two years (a pace they’re still pretty close to, amazingly enough).
And, coincidentally enough, that’s about how much Disney jumped today — the market cap rose by about $20 billion at the open. So yes, Disney+ is now pretty well priced in as a financial event, and it wouldn’t be at all surprising to see it give up half of those gains pretty quickly once the excitement wears off… but Disney was very attractively valued before that as well so I’m not worried and not selling. It’s not cheap anymore, but nobody beats Disney when it comes to cross-marketing and merchandising and developing compelling characters and content. Looking forward to subscribing to Disney+.
Just a quick point on the future of tv streaming subscriptions, i don’t know whether this trend is common wcorldwide ( i live in the uk) but speaking of my kids, their friends ( 7 and 10 age range ) and neices and nephews ranging from 6-15 they almost exclusively watch you tube videos and play connected games such as fortnite and roblox with their friends. I cannot remember the last time my children watched a film or asked about seeing one unless its a birthday party etc. I’d like to know how channels such as disney plan on connecting with these future generations or how alphabet can increase their earnings from you tube?
On the list of future buys front another trend that doesnt seem to be slowing here is McDonalds. Despite the presence of numerous kfc’s, burgrt kings and subways there are always queues at McDonald’s but not at the others and again my kids (and most others by the look of it) always ask to go there first. I wonder what would be a reasonable beaten down multiple for that?(seems as ive missed the recent strong performance)i also wonder what their acquisition of costa coffee potentially adds to their value as its easily as common place and popular if not more so than starbucks over here.
Same here in US, I am in Pacific N0rthwest (still Friday April 12); 13 year old granddaughter on youtube constantly, and I am amazed 11 year old (last week!) grandson plays fortnite with a friend living in Spain – they have headphones and can actually talk to each other as they play!! He recently started playing Apex Legends by EA Electronic Arts (Stock Gumshoe had a teaser about that a month or so ago) and players all over the world on at same time. My son-in-law in digital global ops for Nike, the world truly is getting smaller and more global. I will haveto ask them about Disney+.
Thanks Travis for your insights. Have you heard of Pagerduty (PD)? They only just IPO’d and it has shot up (rather predictably). They are (apparently an) IT Operations intelligence company. Just wondering if you have any thoughts/intelligence on its prospects viz-a-viz the biggies (AMZN, GOOG, etc)
abhinavsukumar, Thanks for the idea. I did some research on PagerDuty and was happy to find that the IPO didn’t collapse on itself the first couple of days of trading the way LYFT’s did.
PD is in the niche of cloud-based technology known as “DevOps”, essentially resolving system issues between developers and operators within an organization in real time. (In other words, doing away with “we’re working on the issue, we’ll get back to you, no estimated time of completion” because operators/customers in today’s world want their answers NOW).
Per the SEC filing, the company named Splunk Inc (SPLK) and Atlassian Corp (TEAM) as its major competitors, so nowhere near the likes of AMZN and GOOG in size and scope. In fact, it’s only 1/10th the size of Splunk with a revenue that will be coming from only one product. But… its customer base is worldwide and one-third of the Fortune 500 companies!
All sounded good in my limited research of the company. I came close to opening a position in PD if it were not for this one (and only) analyst in my brokerage house who sees a downturn of 90% in price – from the current $39 to $3 – in a year’s time, no explanation. Huh? Why?
So I would appreciate Travis’ comments on what’s “wrong” (if any) with this company from an investor’s point of view.
Travis:
I was a little confused about your statement: “Safehold (SAFE) — This is a relatively new REIT that I opened a position in next year.”
I have never been able to open a position in the future. How do you do that?
Blackie
Oops! Typo fixing underway now 🙂
Fixed or not – we are never going to let you forget this :).
So now we know how Travis beats us all at the investment game….he’s clairvoyant!
Thank you once again Travis for these precious insights and well-written articles. The Friday File’s mail notification is the only one I am expecting every week 😉
I had a question for you (or maybe more an advice request):
I am living in France and I am using Degiro as my broker for building my portfolio. Unfortunately this broker doesn’t offer access to any stocks nor all options / warrants that you sometimes acquire. Do you, by any chance, have a recommandation of which broker could I use ? Especially for being able to buy those hedge options (Put (Hedging) SPY ETF Jan 21) or even Kweichow Mountain (600519.SS) ?
You must use an American broker of course, but if you ever heard (or have used) some other broker (and accessible from an European country) I would love to have your recommandation 🙂
Otherwise, thanks again for this very good article and have an excellent week-end.
Cheers to every Irregulars here !
Best,
Pierre-Louis
Hi Pierre-Louis; I am not a customer but have you tried InteractiveBrokers? They are global from USA but I am not sure if they operate from France. I know of one member who uses them from the UK.
https://www.interactivebrokers.com/en/home.php
Thanks Tanglewood for the link, I am gonna check right away 🙂
you can by Softbank and get exposure to Uber. They own s almost 17% of SFTBY at 35 per share.
John Hussman’s bearish thinking sounds similar to Harry Dent at newsletter Boom & Bust, to which I subscribe – inexpensive yearly introductory leading to other higher cost services. Like Hussman, Dent has been off in recent years with the doom predictions, but the bubble has got to burst sometime…..Dent is now predicting downturn similar to Hussman.
Travis, what is your plan on selling big companies, such as Berkshire (which I also own); at what point?, -25%, -30%, -50%. I also own some Amazon, Google, and Microsoft. I am struggling with if/when to sell at downturn, or just hold on for 2-3 years until they recover.
Great reminder article Travis.
Steve take a look at Travis Real Money Portfolio. The spreadsheet has 3 of those stocks with stop loss triggers from Trade Stops VQ. He doesn’t always act on these but uses them as a guideline.
https://www.stockgumshoe.com/personal-portfolio-irregulars-only/
If this link doesn’t work, under ‘articles’ at the top, click on ‘premium content’ and click on the portfolio on the right.
Thanks much Tanglewood, I have been an Irregular a little over two years now and forgot to check the Real Money Portfolio for Travis stop loss triggers. Thanks for the reminder!, Steve
Thanks a lot for the insightful articles. I guess you buy S&P puts to hedge against a 20-30% stock market dip. Like you wisely pointed out, some of the over-valued stocks are likely to go down by >50% in the event of a market crash. Loss making companies like lyft and a few other biotech stocks are sitting ducks that can crash further down. Wondering if you ever got interested in identifying a bunch of sitting ducks to short (buy puts) when the market starts deteriorating?
FYI On Boeing: I saw Kevin O’Leary (chief shark on “Shark Tank”) on CNBC a couple of times recently. BA had been his largest holding but he sold it in anticipation of the bashings to come from politicians. He plans to buy it back when that simmers down. Earlier this week he said BA would be a screaming buy at $350 which I interpreted to mean he would start buying somewhat above that.
Apparently he thinks the MAX 8 problems are just a small bump in the road. And looking at their chart I’d say most investors are sure they will work it out soon and start cranking out many planes. I’m Leary and wouldn’t buy above $300 so I may never buy.
Hi Travis, just wondering if you have looked at Palo Alto Networks (PANW) or Salesforce (CRM) recently? If so, would love to hear your thoughts. Thanks!
I haven’t, sorry. What do you like about them?
Well, noticed both in a recent Morningstar article about several tech stocks that are increasing their competitive advantages – ie, strengthening their economic moats, as Morningstar would say – because they were the only two on the list who were still undervalued. And both are establishing their places in sectors that seem to have a strong future ahead – cybersecurity and enterprise cloud computing. But honestly I haven’t taken a close look at them.
You are so thoughtful and wise in your Friday musings, Travis! You truly are a beacon of light!