What Did You Buy Today?

[crimsonghost747]

Non-GAAP is a dangerous thing to look at since pretty much anything goes for an "adjustment" these days, and I constantly see companies where the non-GAAP is by default higher than the GAAP one. I get that sometimes there is a need for adjustments (such as mergers etc) but more often than not I see companies constantly having these same adjustments in there, and surprisingly almost always the non-GAAP EPS is higher than the GAAP EPS.

There is a reason for GAAP. And I find it significantly better to look at the GAAP EPS and then look at the adjustments separately to see if the things adjusted for are truly one time items or not. Take one of the greatest DGI companies out there: JNJ. The non-GAAP EPS is always higher than the GAAP EPS and things such as legal costs are being adjusted for, every single year. As if JNJ being involved in a lawsuit would be something of a irregular "once in a decade" thing. No, getting sued for a company like JNJ is part of business and there will always be legal cases against them, there will be legal fees every single year. All those lawyers, other legal fees, and settlements etc are being paid by JNJ all the time, yet conveniently they cease to exist when you look at the non-GAAP numbers. It's "one time items" after all.

Same kinda goes for "forward EPS". It's just an estimate by an analyst. And if we were convinced that analysts are right more often than not then we wouldn't be on this forum and the majority of our portfolio would be compromised of all sorts of actively managed funds.

[fenders53]

[quote pid='27266' dateline='1625931839']

(07-10-2021, 09:41 AM)ken-do-nim Wrote:

(07-10-2021, 08:24 AM)EricL Wrote: Here are stocks that I currently show as near or below fair value from my portfolio.
ABBV, AMP, BDX, BMY, D, EOG, FLO, KMI, LMT, MO, PM, SRE, T, WBA

ABBV's P/E ratio is at 41.09; still high I think.

Depending on if you are using GAAP or non-GAAP earnings, trailing or projected earnings.

It's expected to earn $12.55 in non-GAAP in 2021, giving it a PE of 9.3.

It's expected to earn $7.67 in GAAP in 2021, giving it a PE of 15.2.

It had $10.56 in non-GAAP earnings in 2020, giving a PE of 11.0.

It earned $2.72 in GAAP in 2020, giving a PE of 42.9.

Three out of four measures show it trading at a substantial discount to the market, not to mention the near 4.5% yield.
[/quote]
Feel free to contradict me Eric.

Ken,

You seem willing to put in the analytics time and you should if you grow largish holdings in individual stocks.  This is a place to spend some time because a PE without context is just a number.

ABBV PE vs MSFT PE vs a REIT PE really is meaningless to an investor.  S&P500 PE numbers 2005-2015 vs today has some relevance.  It's highly likely historicals won't be completely ignored forever.  It's not a given 1990 will ever matter again though.  Don't hold you breath waiting for UTE PEs to return to 1980 levels.  The game changed.  1999 tech PEs were and still are nuts.  There are limits to valuation insanity that can't be explained away.  There is always context to consider.

Healthcare/pharma PEs would be a good place to learn.  First of all the entire sector is undervalued vs SPY.  There is risk they will be targeted by politicians from both parties.  That may or may not last for years.  Almost all the major pharmas are being discounted some for that.  As an ABBV shareholder you should be very aware their flagship drug comes off patent in 2023. Only a few drugs with this kind of revenue on earth and it's not a given they replace it by then.  Its highly unlikely they will with a single drug but they have a great pipeline so they will get through it IMO.  Maybe they have zero growth for a year or more?  You are being compensated for the risk now.  There is always a reason why a blue chip is on sale for an extended period of time.  In ABBV case it is extremely easy to research.  

I don't even own ABBV though I now regret I didn't grab the super sale 18 months ago.  I do own JNJ-PFE-MRK and a lot of BMY.  BMY is also discounted.  BMY has to show the market the money after their big merger.  They have considerable debt like ABBV. JNJ has one of the best credit ratings in the world.  We are pretty sure what their 2023 earnings look like so it is not extremely undervalued now.  We get paid to take risks.  If I don't bother to investigate the other major players in the sector I should buy a healthcare ETF.  You obviously watch the day to day moves on your stocks.  Knowledge keeps you from over-reacting to random sector moves that are going to happen for no obvious reason.  ABBV PE is nothing like 40 so you have work to do before you even comment on their valuation.

[ChadR]

New positions on AVAL and SJM.

[ken-do-nim]

(07-10-2021, 01:20 PM)fenders53 Wrote: Feel free to contradict me Eric.

Ken,

You seem willing to put in the analytics time and you should if you grow largish holdings in individual stocks.  This is a place to spend some time because a PE without context is just a number.

ABBV PE vs MSFT PE vs a REIT PE really is meaningless to an investor.  S&P500 PE numbers 2005-2015 vs today has some relevance.  It's highly likely historicals won't be completely ignored forever.  It's not a given 1990 will ever matter again though.  Don't hold you breath waiting for UTE PEs to return to 1980 levels.  The game changed.  1999 tech PEs were and still are nuts.  There are limits to valuation insanity that can't be explained away.  There is always context to consider.

Healthcare/pharma PEs would be a good place to learn.  First of all the entire sector is undervalued vs SPY.  There is risk they will be targeted by politicians from both parties.  That may or may not last for years.  Almost all the major pharmas are being discounted some for that.  As an ABBV shareholder you should be very aware their flagship drug comes off patent in 2023. Only a few drugs with this kind of revenue on earth and it's not a given they replace it by then.  Its highly unlikely they will with a single drug but they have a great pipeline so they will get through it IMO.  Maybe they have zero growth for a year or more?  You are being compensated for the risk now.  There is always a reason why a blue chip is on sale for an extended period of time.  In ABBV case it is extremely easy to research.  

I don't even own ABBV though I now regret I didn't grab the super sale 18 months ago.  I do own JNJ-PFE-MRK and a lot of BMY.  BMY is also discounted.  BMY has to show the market the money after their big merger.  They have considerable debt like ABBV. JNJ has one of the best credit ratings in the world.  We are pretty sure what their 2023 earnings look like so it is not extremely undervalued now.  We get paid to take risks.  If I don't bother to investigate the other major players in the sector I should buy a healthcare ETF.  You obviously watch the day to day moves on your stocks.  Knowledge keeps you from over-reacting to random sector moves that are going to happen for no obvious reason.  ABBV PE is nothing like 40 so you have work to do before you even comment on their valuation.

While I do know about the drug going off patent in 2023, the rest of the P/E conversation went over my head so, yeah, lots to learn there.  I was used to going to the stock profile and looking at the listed PE.  Clearly it's more nuanced than that.

[fenders53]

[quote pid='27271' dateline='1626107287']

(07-10-2021, 01:20 PM)fenders53 Wrote: Feel free to contradict me Eric.

Ken,

You seem willing to put in the analytics time and you should if you grow largish holdings in individual stocks.  This is a place to spend some time because a PE without context is just a number.

ABBV PE vs MSFT PE vs a REIT PE really is meaningless to an investor.  S&P500 PE numbers 2005-2015 vs today has some relevance.  It's highly likely historicals won't be completely ignored forever.  It's not a given 1990 will ever matter again though.  Don't hold you breath waiting for UTE PEs to return to 1980 levels.  The game changed.  1999 tech PEs were and still are nuts.  There are limits to valuation insanity that can't be explained away.  There is always context to consider.

Healthcare/pharma PEs would be a good place to learn.  First of all the entire sector is undervalued vs SPY.  There is risk they will be targeted by politicians from both parties.  That may or may not last for years.  Almost all the major pharmas are being discounted some for that.  As an ABBV shareholder you should be very aware their flagship drug comes off patent in 2023. Only a few drugs with this kind of revenue on earth and it's not a given they replace it by then.  Its highly unlikely they will with a single drug but they have a great pipeline so they will get through it IMO.  Maybe they have zero growth for a year or more?  You are being compensated for the risk now.  There is always a reason why a blue chip is on sale for an extended period of time.  In ABBV case it is extremely easy to research.  

I don't even own ABBV though I now regret I didn't grab the super sale 18 months ago.  I do own JNJ-PFE-MRK and a lot of BMY.  BMY is also discounted.  BMY has to show the market the money after their big merger.  They have considerable debt like ABBV. JNJ has one of the best credit ratings in the world.  We are pretty sure what their 2023 earnings look like so it is not extremely undervalued now.  We get paid to take risks.  If I don't bother to investigate the other major players in the sector I should buy a healthcare ETF.  You obviously watch the day to day moves on your stocks.  Knowledge keeps you from over-reacting to random sector moves that are going to happen for no obvious reason.  ABBV PE is nothing like 40 so you have work to do before you even comment on their valuation.

While I do know about the drug going off patent in 2023, the rest of the P/E conversation went over my head so, yeah, lots to learn there.  I was used to going to the stock profile and looking at the listed PE.  Clearly it's more nuanced than that.
[/quote]
It's a necessary skill to have some concept of valuation if you are going to buy individual stocks.  Especially in a market with most sectors trending overvalued.  I do think it would be best if you start by looking at one sector.  The term "PEG" ratio might help you understand why some sectors have much different PEs.  You can always ask questions here.

[stockguru]

ABBV forward PE is only 9.42. So its very cheap and still had a dividend yield of over 4%

You cant use current PE on any stock as that doesn't tell the story. When we buy a stock where not buying it for today, but for the future and long time. Isn't that the reason why we have this forum lol

I added to ABBV just now on ex-dividend day.
Also added a significant position in JEPI

And oil stocks are still very cheap when you use forward PE

CVX - 17 PE
EOG - 11 PE
XOM - 16 PE

MSFT PE 33 (so not bad for a tech name)
AVGO - 16
AAPL - 27
TSM - 31
AMAT - 18

Still a few under 20 with AMAT and AVGO. Just a few names to compare with

So there is some value in the market still. Just have to know where to find it.

[stockguru]

PYPL – 63
SQ – 169
TXN – 26
CRM – 70
ADBE – 51
FB – 30
TTD – 180
NVDA – 52
NOW – 104
CRWD – 711
ETSY – 67
TTWO – 42
ENPH - 141

Some expensive names here. Gives you an idea that any hiccup with these names, and they will get punished. As of now I have no stocks with a PE over 30. That’s the way I’m playing the market going forward.

[kblake]

(07-13-2021, 10:17 AM)stockguru Wrote: PYPL – 63
SQ – 169
TXN – 26
CRM – 70
ADBE – 51
FB – 30
TTD – 180
NVDA – 52
NOW – 104
CRWD – 711
ETSY – 67
TTWO – 42
ENPH - 141

Some expensive names here. Gives you an idea that any hiccup with these names, and they will get punished. As of now I have no stocks with a PE over 30.  That’s the way I’m playing the market going forward.

Thanks for posting, This info is very helpful. It's like what I have been saying. The tech names are all priced for perfection. The day will come when they will collapse. Like you I have been buying the value names. Investors don't know how to figure out future PE. Most see the oil names with negative earnings and say they are over valued. I have been adding to both CVX and EOG. Banks have come down as well and I'm looking at some of the those names as well. WFC comes to mind.

[fenders53]

The problem is even deeper than that. I agree rookie investors don't know how to analyze a PE. Their ignorance has paid off. Funds know better, but they roll with the game and feed the MO anyway because it's been working a very long time. They know when to trim. I get "scolded" here repeatedly for keeping 80% of my port extremely sane at all times. I've left easy money on the table and this foolishness could continue for another year or more. Be as sure as you like but you are just guessing in the near term. It's exactly why all my option sells are short term.

My SPEC game wound down to zero so gradually adjusting that. Sold a few spec puts today expiring fast. It works until it doesn't and they roll easy at least once.

[Dividendwayfarer]

(07-13-2021, 10:04 AM)Ïstockguru Wrote: ABBV forward PE is only 9.42. So its very cheap and still had a dividend yield of over 4%

You cant use current PE on any stock as that doesn't tell the story.  When we buy a stock where not buying it for today, but for the future and long time. Isn't that the reason why we have this forum lol

I added to ABBV just now on ex-dividend day.
Also added a significant position in JEPI

And oil stocks are still very cheap when you use forward PE

CVX - 17 PE
EOG - 11 PE
XOM - 16 PE

MSFT PE 33 (so not bad for a tech name)
AVGO - 16
AAPL - 27
TSM - 31
AMAT - 18

Still a few under 20 with AMAT and AVGO. Just a few names to compare with

So there is some value in the market still. Just have to know where to find it.

Never look closely at AMAT and it appears to be a good stock. I plan to increase my tech exposure so I would initiate a position on AMAT. Thanks for the tip.

[fenders53]

The shares are never cheap enough for me so sold a few out of the money puts today. TTCF-CHWY and yet another AUG VSTO put. I am going to chill out on VSTO after the next earnings report. Only room for one or two more spec play in the port this month. VSTO isn't SPEC but I have added SPEC this week.

[EricL]

Used some pooled dividends to add another share of FISV in my ROTH.

Thought the chart looked like a decent place to add.