6 ms·

Investors are willing to accept much lower long-term returns for safe haven assets. If you're going to "just own the damn robots" at any price, you're essentia

by pdog 9y ago

Investors are willing to accept much lower long-term returns for safe haven assets. If you're going to "just own the damn robots" at any price, you're essentially paying for this sort of insurance.

adventured 9y ago
I agree investors will continue to own these companies in a very big way. They won't continue to maintain much less inflate the premium that presently exists. Microsoft for example has barely grown its income in a decade. On what planet should they have a 28 pe ratio? The stock has tripled (!) in five years on the back of zero income growth. It's massive value destruction just waiting to happen. Shareholders will not just sit, hold and tolerate the inevitable value destruction that is looming, it doesn't work as insurance at all in such a context.
- frandroid 9y ago
  You forget that Microsoft's stock stagnated for 10 years before that. A 28 PE ratio is the new normal for tech companies. With Ballmer out of the picture, investors are speculating on a brighter future for MS. It's not here yet but they're making lots of smart moves.
  - adventured 9y ago
    > A 28 PE ratio is the new normal for tech companies. It's not the new normal. That's what people say to justify extreme premiums during times in which investors have overly inflated valuations. This is the third bubbly tech era in the last 20 years. That new normal premise has been used frequently in each. I understand why Microsoft has inflated. It doesn't jive with actual results in the post Ballmer era. There isn't even a hint of the kind of growth that could justify such an elevated PE ratio (elevated for a company with no growth for years). Their fast growth areas are struggling to off-set what they're losing in eroding, old business franchises. Net result, they're standing still.
- paulpauper 9y ago
  the problem with this argument is if you wait, you may leave money on the table in the form of: missed dividends the possibility that Microsoft grows its profits more the possibility the stock keeps rising, and then even if it falls, it's still higher than the price you sold The last reason is why timing the market is so hard. Had you sold the S&P 500 in early 1996 because it was 'too expensive', you would have never been able to buy back at a lower price, ever, even after the crash of 2000-2002 and 2008-2009, and you would have missed all the dividends.
- sunpar 9y ago
  Microsoft has to defer reporting revenue on sales of Windows 10. From their recent investor letter: "We delivered $90.0 billion in revenue and $22.3 billion in operating income this past fiscal year. Adjusting for Windows 10 revenue deferrals and restructuring expenses, revenue was $96.7 billion with $29.3 billion in operating income." That is 31% more revenue and 34% more operating income compared to 2012 (the 5 year time period you're citing). Stock backs will also move the price -- there's almost a billion fewer shares outstanding now than there were 5 years ago. Of course, investors buy companies for future performance and not for past performance. I would suggest that investors like MSFT's current strategy and management considerably more than their past, and as the management continues to increase profits, investors gain more confidence.
paulpauper 9y ago
but Facebook, Google, Amazon, and Microsoft are software, not hardware, so you're not owning the robots.
- jameshart 9y ago
  The robots are not literally robots in this story. Trading algorithms are robots. Uber's ability to connect riders and drivers is a robot. That said, Amazon and google are in the robot hardware business literally, too.
  - robotresearcher 9y ago
    Amazon is, but their customer is themselves. They use 50,000 robots today and that will grow fast. Google doesn't sell robots. I don't know if they use them, apart from a few for research.
    - ThomPete 9y ago
      Their web spider is a robot. We are far past the time when humans could catalog that much change.
      - deleted 9y ago
        [deleted]
    - TrickyRick 9y ago
      A self driving car is a robot, they will be selling that in a near future if Google themselves are to be believed.
      - robotresearcher 9y ago
        Oops yes of course. I stupidly forgot about them. They spun them out from the Google brand and also my brain.
- milcron 9y ago

by pdog 9y ago

Investors are willing to accept much lower long-term returns for safe haven assets. If you're going to "just own the damn robots" at any price, you're essentially paying for this sort of insurance.

adventured 9y ago

I agree investors will continue to own these companies in a very big way. They won't continue to maintain much less inflate the premium that presently exists. Microsoft for example has barely grown its income in a decade. On what planet should they have a 28 pe ratio? The stock has tripled (!) in five years on the back of zero income growth. It's massive value destruction just waiting to happen. Shareholders will not just sit, hold and tolerate the inevitable value destruction that is looming, it doesn't work as insurance at all in such a context.

frandroid 9y ago
You forget that Microsoft's stock stagnated for 10 years before that. A 28 PE ratio is the new normal for tech companies. With Ballmer out of the picture, investors are speculating on a brighter future for MS. It's not here yet but they're making lots of smart moves.
- adventured 9y ago
  > A 28 PE ratio is the new normal for tech companies. It's not the new normal. That's what people say to justify extreme premiums during times in which investors have overly inflated valuations. This is the third bubbly tech era in the last 20 years. That new normal premise has been used frequently in each. I understand why Microsoft has inflated. It doesn't jive with actual results in the post Ballmer era. There isn't even a hint of the kind of growth that could justify such an elevated PE ratio (elevated for a company with no growth for years). Their fast growth areas are struggling to off-set what they're losing in eroding, old business franchises. Net result, they're standing still.
paulpauper 9y ago
the problem with this argument is if you wait, you may leave money on the table in the form of: missed dividends the possibility that Microsoft grows its profits more the possibility the stock keeps rising, and then even if it falls, it's still higher than the price you sold The last reason is why timing the market is so hard. Had you sold the S&P 500 in early 1996 because it was 'too expensive', you would have never been able to buy back at a lower price, ever, even after the crash of 2000-2002 and 2008-2009, and you would have missed all the dividends.
sunpar 9y ago
Microsoft has to defer reporting revenue on sales of Windows 10. From their recent investor letter: "We delivered $90.0 billion in revenue and $22.3 billion in operating income this past fiscal year. Adjusting for Windows 10 revenue deferrals and restructuring expenses, revenue was $96.7 billion with $29.3 billion in operating income." That is 31% more revenue and 34% more operating income compared to 2012 (the 5 year time period you're citing). Stock backs will also move the price -- there's almost a billion fewer shares outstanding now than there were 5 years ago. Of course, investors buy companies for future performance and not for past performance. I would suggest that investors like MSFT's current strategy and management considerably more than their past, and as the management continues to increase profits, investors gain more confidence.

paulpauper 9y ago

but Facebook, Google, Amazon, and Microsoft are software, not hardware, so you're not owning the robots.

jameshart 9y ago
The robots are not literally robots in this story. Trading algorithms are robots. Uber's ability to connect riders and drivers is a robot. That said, Amazon and google are in the robot hardware business literally, too.
- robotresearcher 9y ago
  Amazon is, but their customer is themselves. They use 50,000 robots today and that will grow fast. Google doesn't sell robots. I don't know if they use them, apart from a few for research.
  - ThomPete 9y ago
    Their web spider is a robot. We are far past the time when humans could catalog that much change.
    - deleted 9y ago
      [deleted]
  - TrickyRick 9y ago
    A self driving car is a robot, they will be selling that in a near future if Google themselves are to be believed.
    - robotresearcher 9y ago
      Oops yes of course. I stupidly forgot about them. They spun them out from the Google brand and also my brain.
milcron 9y ago