What Did You Buy Today?

[Otter]

(09-13-2019, 04:00 PM)stockguru Wrote: You can’t base your decisions on past. I learned that the hard way. All those companies I thought we’re over valued cost me money. Wall Street is always looking ahead. You have to pay up for growth and future growth. MCD is growing fast and no one can touch them in sales. Forward PE is only 19 so that’s not bad at al. They also pay $1.13 dividend. I own it and plan on holding for many years.


I can name 100 companies that are way over valued but keep hitting new highs. A lot of times the stocks that look cheap are cheap for a reason.

That chart service you use. You pay a lot?

I pay 9.95/month for Fastgraphs. The easy visualization of value is very helpful to me as a starting point for making purchase decisions. Chuck Carnevale (creator of the service) has had some very helpful posts on Seeking Alpha explaining how to use it effectively, and explaining his stance on value (I tend to agree with him when it comes to theories of stock valuation). 

I'm always skeptical about future earnings prospects and analyst estimates. Analysts and companies have proven historically terrible at predicting the next big downturn that trashes both the P and E side of their equations. That said, Fastgraphs does include analyst earnings estimates in its graphs (the part of the P/E lines that extend forward into the future). Consensus analyst estimates are for 2020 and 2021 earnings growth rates substantially below the double-digit growth rates notched in 2016-2018. If you assume those consensus estimates are correct, and assume that MCD will eventually trade back to its historical average of a 20.55 P/E, its current stock price is still 7% higher than it should be by year-end 2021, 9 quarters from now.