5 ms·

Just because a company isn't distributing dividends doesn't mean you're only buying a story. AMZN still has lots of room to grow. If I'm an investor in AMZN I w

Just because a company isn't distributing dividends doesn't mean you're only buying a story. AMZN still has lots of room to grow. If I'm an investor in AMZN I would much rather them reinvest profits into a data center that will produce even more future profits than distribute the money to me. Once these growth companies top out in terms of their market share they'll pivot to distributing dividends, same as large established companies like Coca Cola

ahi 5y ago
CocaCola currently has a P/E of 32
- robjan 5y ago
  You own the stock in perpetuity, not just for a year. As long as you don't expect the company to go bust any time soon that's not a bad PE ratio.
  - ISL 5y ago
    As recently as 2011, KO had a P/E of 9. https://www.macrotrends.net/stocks/charts/KO/cocacola/pe-ratio https://www.macrotrends.net/stocks/charts/KO/cocacola/pe-rat... There are two ways that a P/E can return to a quasi-normal value. Either the price can go down or the earnings can increase. The mean and median values, since 1880, are about 15. "This time, it's different" https://www.multpl.com/s-p-500-pe-ratio https://www.multpl.com/s-p-500-pe-ratio
    - nostrademons 5y ago
      So if earnings increase 3x the P/E goes back down to ~10. KO has excellent margins - last time I looked they were around 60%. That means prices * sales only has to increase by 5x to bump earnings up 3x. Food prices have been inflating at 10-15% recently; 15% inflation over 11 years will get you there, and that doesn't include any growth in sales at all. These aren't unreasonable assumptions, given the macro environment: another 1970s inflationary episode would do it. (Indeed, Warren Buffett made a lot of his money investing in Coca-Cola and See's Candies during the 1970s.)
      - kgwgk 5y ago
        > margins - last time I looked they were around 60%. That means prices * sales only has to increase by 5x to bump earnings up 3x. I am not sure about the logic (are you assuming marging expansion?) but probably you are trying to say something else than revenue has to increse "only" five-fold for earnings to triple. > Food prices have been inflating at 10-15% recently; Sure.
      - ISL 5y ago
        I'm not sure I follow all the arithmetic here (I'm pretty sure that, at fixed margin, revenue would only need to increase by 3x to increase earnings by 3x), but I did follow up to see what Berkshire had paid for Coca-Cola. This thoughtful Quora post claims that Buffett made his first purchase of KO at a P/E of 29. https://www.quora.com/What-was-the-P-E-Buffett-paid-for-Coca-Cola https://www.quora.com/What-was-the-P-E-Buffett-paid-for-Coca...
    - deleted 5y ago
      [deleted]
    - v_london 5y ago
      Stock prices are absolutely inflated, and as a small-scale investor I'm scared. However, I'm not pulling out because realistically, there's no other asset that's safer in the long run. Interest rates are close to zero so returns in bonds are low, inflation will eat away money held in cash deposits and don't even get me started on cryptocurrency, rare sneakers or other "alternative investments". I started investing in stocks in 2017, even then people were warning that we were in a bubble that was bound to burst at some point. Not investing would have missed me several years of above-average returns. But today, there seems to be a bubble on everything after all the money printing. So I'll keep investing in good, underhyped and stable companies and try to weather whatever storm, good or bad, will come in the next years.
      - imtringued 5y ago
        >So I'll keep investing in good, underhyped and stable companies and try to weather whatever storm, good or bad, will come in the next years. This is the obvious strategy, reduce your risk tolerance and go with proven companies. Put your money (fresh from your bank account, not from your portfolio) into moonshots when you can afford to lose them, after that put the moonshot money back into your boring but relatively safe investments. There are low volatility or stable dividends ETFs that specialize in this.
kingsuper20 5y ago
Personally, I'm not smart enough to pick individual stocks. At some point (perhaps now) Amazon growth is predicated on cannibalizing other companies. After all, the broad market can't exceed the GDP generally for the long term. My primary point here is not to argue about investment concepts, merely to state a concern about the artificiality of it all. Financialization is real and rather spooky.
- skystarman 5y ago
  The thing is there's a FRACTION of a percentage of people who are "good at picking stocks". Most PROFESSIONAL stock pickers don't beat the market. And those that do, a tiny fraction can do it consistently over a 5-10 year time frame. This is backed up by decades of data. But we still have millions of people who apparently think they are smarter than the thousands of professional stock-pickers who have MAs, PhDs and years of experience and do it full-time and still don't beat the market. And sure, many average joes were wildly successful with GME or whatever the latest meme stock is. Just as many people made a ton of money in the last tech bubble. Check back in 5-10 years...
  - deleted 5y ago
    [deleted]
  - confidantlake 5y ago
    Exactly. Just like if you get 1000 people in a room, odds are one of them will get a coin toss right 10 times in a row. Doesn't mean that guy is good at predicting coin tosses.
  - kaydub 5y ago
    It has nothing to do with me thinking I'm smarter than all those guys. The market is irrational. I'm counting on being luckier than those guys more than anything.
    - skystarman 5y ago
      That's a certainly more rational position than believing your are smarter than the thousands of people with PhDs in finance or CS who pick stocks full time. Any yes, what people on WallStreetBets are doing is gambling. Which is perfectly fine, I just wish more would acknowledge it.

ahi 5y ago

CocaCola currently has a P/E of 32

robjan 5y ago
You own the stock in perpetuity, not just for a year. As long as you don't expect the company to go bust any time soon that's not a bad PE ratio.
- ISL 5y ago
  As recently as 2011, KO had a P/E of 9. https://www.macrotrends.net/stocks/charts/KO/cocacola/pe-ratio https://www.macrotrends.net/stocks/charts/KO/cocacola/pe-rat... There are two ways that a P/E can return to a quasi-normal value. Either the price can go down or the earnings can increase. The mean and median values, since 1880, are about 15. "This time, it's different" https://www.multpl.com/s-p-500-pe-ratio https://www.multpl.com/s-p-500-pe-ratio
  - nostrademons 5y ago
    So if earnings increase 3x the P/E goes back down to ~10. KO has excellent margins - last time I looked they were around 60%. That means prices * sales only has to increase by 5x to bump earnings up 3x. Food prices have been inflating at 10-15% recently; 15% inflation over 11 years will get you there, and that doesn't include any growth in sales at all. These aren't unreasonable assumptions, given the macro environment: another 1970s inflationary episode would do it. (Indeed, Warren Buffett made a lot of his money investing in Coca-Cola and See's Candies during the 1970s.)
    - kgwgk 5y ago
      > margins - last time I looked they were around 60%. That means prices * sales only has to increase by 5x to bump earnings up 3x. I am not sure about the logic (are you assuming marging expansion?) but probably you are trying to say something else than revenue has to increse "only" five-fold for earnings to triple. > Food prices have been inflating at 10-15% recently; Sure.
    - ISL 5y ago
      I'm not sure I follow all the arithmetic here (I'm pretty sure that, at fixed margin, revenue would only need to increase by 3x to increase earnings by 3x), but I did follow up to see what Berkshire had paid for Coca-Cola. This thoughtful Quora post claims that Buffett made his first purchase of KO at a P/E of 29. https://www.quora.com/What-was-the-P-E-Buffett-paid-for-Coca-Cola https://www.quora.com/What-was-the-P-E-Buffett-paid-for-Coca...
  - deleted 5y ago
    [deleted]
  - v_london 5y ago
    Stock prices are absolutely inflated, and as a small-scale investor I'm scared. However, I'm not pulling out because realistically, there's no other asset that's safer in the long run. Interest rates are close to zero so returns in bonds are low, inflation will eat away money held in cash deposits and don't even get me started on cryptocurrency, rare sneakers or other "alternative investments". I started investing in stocks in 2017, even then people were warning that we were in a bubble that was bound to burst at some point. Not investing would have missed me several years of above-average returns. But today, there seems to be a bubble on everything after all the money printing. So I'll keep investing in good, underhyped and stable companies and try to weather whatever storm, good or bad, will come in the next years.
    - imtringued 5y ago
      >So I'll keep investing in good, underhyped and stable companies and try to weather whatever storm, good or bad, will come in the next years. This is the obvious strategy, reduce your risk tolerance and go with proven companies. Put your money (fresh from your bank account, not from your portfolio) into moonshots when you can afford to lose them, after that put the moonshot money back into your boring but relatively safe investments. There are low volatility or stable dividends ETFs that specialize in this.

kingsuper20 5y ago

Personally, I'm not smart enough to pick individual stocks. At some point (perhaps now) Amazon growth is predicated on cannibalizing other companies. After all, the broad market can't exceed the GDP generally for the long term. My primary point here is not to argue about investment concepts, merely to state a concern about the artificiality of it all. Financialization is real and rather spooky.

skystarman 5y ago
The thing is there's a FRACTION of a percentage of people who are "good at picking stocks". Most PROFESSIONAL stock pickers don't beat the market. And those that do, a tiny fraction can do it consistently over a 5-10 year time frame. This is backed up by decades of data. But we still have millions of people who apparently think they are smarter than the thousands of professional stock-pickers who have MAs, PhDs and years of experience and do it full-time and still don't beat the market. And sure, many average joes were wildly successful with GME or whatever the latest meme stock is. Just as many people made a ton of money in the last tech bubble. Check back in 5-10 years...
- deleted 5y ago
  [deleted]
- confidantlake 5y ago
  Exactly. Just like if you get 1000 people in a room, odds are one of them will get a coin toss right 10 times in a row. Doesn't mean that guy is good at predicting coin tosses.
- kaydub 5y ago
  It has nothing to do with me thinking I'm smarter than all those guys. The market is irrational. I'm counting on being luckier than those guys more than anything.
  - skystarman 5y ago
    That's a certainly more rational position than believing your are smarter than the thousands of people with PhDs in finance or CS who pick stocks full time. Any yes, what people on WallStreetBets are doing is gambling. Which is perfectly fine, I just wish more would acknowledge it.