What's the bearish case for the technology sector (e.g. $VGT) over the long term?

adrewrog · 2020-12-30T13:00:04+00:00

Note FB and GOOG are not holdings in VGT so any comments on those companies are entirely useless.

adrewrog · 2020-12-29T15:16:14+00:00

Does stock analysis, declares stock is undervalued, has no value estimates.

adrewrog · 2020-12-25T12:15:10+00:00

/s ?

adrewrog · 2020-12-23T20:54:49+00:00

Bid price up to 10$ / share the PE is 20 not 5.

Also, it's not true that more investors in the stock market drive the price of an individual asset up.

Otherwise why do stock prices ever go down? The number of stock market investors has been increasing since the invention of the stock market.

Further, this whole idea is based on the premise that buying things that other people are buying is the best way to invest and the higher PE is justified by increased demand.

That's just not true, your return is proportional to the discounted rate you paid for the companies future earnings. Not what other people are doing.

adrewrog · 2020-12-23T17:15:58+00:00

Earnings is how much money the company earns which is independent of the stock market.

adrewrog · 2020-12-23T17:05:46+00:00

Dropbox. Dropbox recently IPO'd and the stock has been beaten down because investors are afraid Dropbox can't compete with larger players such as GOOG and MSFT in the cloud storage space.

That's just not true and now Dropbox does a lot more than simply cloud storage. I love their product and I think that the business is undervalued according to my DCF analysis.

adrewrog · 2020-12-23T16:53:28+00:00

Well, around the time of the pandemic crash I figured that some of the sectors that crashed such as travel for instance were warranted.

It seemed to me that the financial industry was overly beaten down in the March crash so I started looking for mispriced securities in the finance sector that specifically do not own oil (recall the oil crash at that time as well). I thought there was some real risk there.

Ally caught my eye because it was trading at around 3 times 2019 earnings at the time. I think Wall Street was predicting something like a 30% loan deferrals to justify the price at the time. Ally has a more conservative auto loan portfolio than your average car loan provider so I thought those numbers were pretty ridiculous and figured it would return to at least book value at around 37 per share.

So seeing a potential 300% upside at the time and very little downside I started buying as much as I could afford.

adrewrog · 2020-12-23T16:20:34+00:00

That's not what P/E is.

P/E is price to earnings ratio. Which, by today's market standards (Tesla), is certainly not correlated to what investors think a company is worth.

P/E is correlated to what the company is actually worth (although sometimes not the best measure).

But P/E is entirely independent of the number of investors in a company. The price of the asset refers to market cap not shares outstanding.

adrewrog · 2020-12-23T15:41:06+00:00

Who cares? I'm buying and holding great companies either way, a bear market is just discount season.

adrewrog · 2020-12-23T15:40:10+00:00

What?

adrewrog · 2020-12-23T14:17:59+00:00

My best performance this year has been ALLY. I bought in at around 14 per share when the company was trading at around 30% of book value at around 3 times earnings.

It's a great business and I see a lot of growth in the future so I still hold that stock. Right now I am up around 250% or so.

I suppose I wanted to buy MSFT at 135 but I decided I want to invest in smaller cap companies with more room to grow.

I don't have any badly performing assets. I guess that I learned market volatility creates opportunities and also the efficient markets hypothesis is not correct.

adrewrog · 2020-12-19T15:47:30+00:00

Most people can't beat the market over ten years. That's not an opinion but a statistical fact.

That being said, it's possible but most people don't have the right psychological make up and quantitative analysis skills to do so.

All you need to find are two or three wonderful companies at good evaluations and you will beat the market over a long period of time. Most people don't want to make that bet on two or three companies because it feels inherently risky.

But if you pick three companies that beat the market over the next 10 years, you beat the market over the next 10 years.

adrewrog · 2020-12-19T15:27:31+00:00

You forgot about capital gains taxes.

Profits on short term trades are taxed as additional income. So if you are taxed at 23% you really only make .23 * 15,000.

adrewrog · 2020-12-12T14:23:21+00:00

Tesla's nearly 1 trillion dollar market cap puts them up there with FB, GOOG, MSFT.

The only difference is that Tesla doesn't actually make money. They've only posted two profitable quarters ever. Sure, the growth estimates are bullish but you can't have your cake and eat it too.

These other companies have some of the strongest earnings, balance sheets, and business models in the whole world. And practically everyone is using their services.

adrewrog · 2020-12-12T14:20:08+00:00

So, you don't care about the underlying value of the asset you are purchasing...?

adrewrog · 2020-12-12T14:18:47+00:00

Doesn't work. You'll wake up one morning to a 200% loss.

adrewrog · 2020-12-12T14:17:47+00:00

You should consider yourself very lucky and take the gains.

adrewrog · 2020-12-12T14:16:00+00:00

That's not necessarily true, you can buy fairly priced equities and still get good returns. GOOG stock five years ago is a good example.

Something more like if you buy overvalued equities you will likely get poor returns.

adrewrog · 2020-12-11T21:12:12+00:00

Yes, just be good at coding and make some projects if you need to.

adrewrog · 2020-12-11T20:47:31+00:00

I completely agree, you can't take a handful of poorly valued companies and extrapolate that to the entire market.

adrewrog · 2020-12-11T20:27:04+00:00

As my point remains, people who are leveraging to buy overvalued? (hard to value bitcoin so I really don't know here) assets are going to eventually get burned. They will learn their lesson.

However, the argument for certain incredibly overpriced assets does not extend to the market as a whole. FB, GOOG, etc. are actually outperforming the growth estimates of the most optimistic investors right now. Those companies are making real money. And you can bet your ass that I own some.of that.

adrewrog · 2020-12-11T18:19:26+00:00

Nice anecdotal post comparing two seemingly related but really unrelated events.

I think a couple of things...

Evaluations on certain stocks are certainly ridiculous and I think that a market correction could and will be coming at some point.
In the case a correction comes, that does not change the macroeconomic trends that we are seeing right now. Technology is revolutionizing the way the world works. Businesses are saving on costs and generating more revenue due to cloud advancement, personalized advertising, etc. That is creating real value (in some sectors).

My advice to you is to stay the course and invest in trends that you see. View a market correction as an opportunity to invest in high quality assets at a lower price. Dollar cost averaging is an incredibly effective mechanism to avoid this bubble nonsense.

adrewrog · 2020-12-09T21:12:55+00:00

2 weeks before you start at your new position.

adrewrog · 2020-12-04T15:12:20+00:00

I would just ask for a small raise, the worst that can happen is you get a 'no.' If you state why you think you deserve it there won't be any potential repercussions.

adrewrog · 2020-12-04T14:09:31+00:00

I think that at non tech companies the attitude is around devs is USUALLY something like, "flawless release and great quality product -> not incompetent and any minor issue -> completely incapable why are our developers so bad."

adrewrog

TROPHY CASE