Apple and Amazon had amazing quarters. Records, really. Huge profits, revenues, etc. But in the stock market, we always need MORE. More growth. More revenues. More profits. Investors price companies based on growth continuing at a certain, unattainable rate FOREVER. And when that rosy forecast starts to slow to a reasonable rate, if not flat or negative, the stock gets absolutely hammered. AAPL and AMZN shares have been down ~1-4% most of the after-hours and pre-market sessions - giving back some of the gains from Thursday, if not a bit more.
Why should a company grow forever? We should price companies as if they have somewhat finite lives. A big growth followed by a 50% decline and then a long, flat line. I was thinking about this same concept in the utility world - where in a certain version of the future, we don't need utilities any more. The good news is there's a concept in utilities of a "stranded asset". Where if an asset is no longer "used and useful", the utility is made whole on the remaining book value of their investment. So if the risk is that a utility can no longer grow, has assets stranded, then the stock should trade at a modest premium to book value. Not at the wild premiums that most utilities trade at relative to book value. At least in that view of the future.
So do these thoughts continue to cement my position as a bear? Sort of. I've become much more aware of the risks in investing than I was even 9 months ago. A lot can go wrong. A lot does go wrong. And the future changes fast. We should always have an eye on the pessimistic view, while also taking into account the optimistic view. The truth is somewhere in the middle.
Happy Halloween and good luck today.
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1) 7% of mortgage-ees are behind. 3 million people/homes.
2) Search activity for "covid symptoms".
3) GDP up 33% doesn't make up for GDP down 32% in the prior quarter...that's not how math works.
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My only plan today is to close or roll my BUD, XOM, and AMT puts. And of course make a few day trades, depending on how the market is looking in the real session.
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