4 ms·

3% yield with moderate growth/fair amount of legal risk looks quite bad to me. The 10y treasury pays more than 3% risk free, and you can buy a close to risk fr

3% yield with moderate growth/fair amount of legal risk looks quite bad to me. The 10y treasury pays more than 3% risk free, and you can buy a close to risk free (and tax free) Muni bond paying 5% Despite Apple’s entrenched position, their large size limits how quickly they can grow, and they’re almost certain to face antitrust/legal action from congress if they grow materially further from here. Effectively capping how large they can get. There are tons and tons of fire-saled stocks out there yielding far higher with still limited risk. Many REITs in particular have mid to high single digit yield with arguably less risk and similar growth profile. The S&P500 in general is overbid/overvalued nowadays due to passive flows. Some crazy valuation disparities between like kind businesses that are in/out. To your point, 30 PE looks low relative to broader tech valuations in the 2010s. But this is not the ZIRP era of the 2010s

adwi 3y ago
What are some of the stocks you view as fire sales?
- phkahler 3y ago
  You might like a P/E of 7.14 for XOM - ExxonMobil, but you'd also be betting against EVs taking over the world in the near term (not a bad bet IMHO). The yield is only 3.5 percent, but they have a history of not reducing the dividend so it's conservative. I'd call it a fire sale but the stock price itself hasn't done much overall in 15 years either. You can't fight public perception ;-)
- adam_arthur 3y ago
  My portfolio is primarily yield focused on a risk adjusted basis. I like PINE here at 10x AFFO, far cheaper than peers like O or ADC, but with similar risk profile. CTO same story. Both around 10% earnings yield, and better positioned than peers for growth. PINE is classic retail net lease, CTO is outdoor shopping centers in the sunbelt. Growth prospects, but also fine if they stay flat and yield 10% in perpetuity Bonds are interesting here, but would need to see wider spreads for higher quality/non-idiosyncratic ones to be compelling. I like and own MPW bonds, which pay 10%+... much safer than the equity. Certain BDCs are a screaming deal if you assume their portfolios can weather a recession well enough. CSWC is one of my favorite more traditional middle market lenders with 13% yield and low leverage. Conservative/smart management. RWAY is one of my favorites here… over 15% yield with room to grow. Venture debt lender, valued at around 0.7x book value. They’ve been lumped in with other Venture lenders whose portfolio quality is very poor in comparison. Lenders can easily blow up in a severe recession if they’re mismanaged or have weak portfolios… but given the banking turmoil, the sector has sold off indiscriminately and more than priced it in for some. PBR.A has a PE around 2-3 and pays 30% a year in dividends. Valuation is low due to political risk from new Brazilian government. For a more speculative play, NLCP pays around 13% yield with 0 debt, and some cash on hand. They own cannabis cultivation/retail facilities. The sector is falling apart due to declining cannabis prices, but we just hit the inflection point recently where pricing is starting to rise again due to competitors dropping out, and I think the fears have more than priced in what’s to come. Not one I’d own longer term due to eventual offshoring of production. These are my more compelling total return plays, but there are many many more that are safer and still yield far higher than AAPL. JEPI is a great one… owns primarily defensive stocks, and pays 10%/year from options income. However average holding PE is around 22, so Im waiting for it to get knocked down into the teens before I go bigger. Same with SCHD
- adverbly 3y ago
  Are we getting our stock tips in public on the internet now from anonymous sources? That will make things a lot easier for me. Doing actual research myself was kind of hard. /sarcasm
  - hnfong 3y ago
    “If shoeshine boys are giving stock tips, then it's time to get out of the market.”
throw0101c 3y ago
> The 10y treasury pays more than 3% risk free […] We'll see about "risk free": * https://www.politico.com/news/2023/05/12/debt-limit-could-crash-congress-summer-break-00096657 https://www.politico.com/news/2023/05/12/debt-limit-could-cr... * https://en.wikipedia.org/wiki/United_States_debt_ceiling https://en.wikipedia.org/wiki/United_States_debt_ceiling :)
- adam_arthur 3y ago
  Worst case the payments pause for a period, and resume shortly after. But the government will prioritize debt payment over operational expenses, because the consequences of not paying the debt are much higher than furloughing employees. e.g. financial crisis and market crash Not really a meaningful impact from a long term return perspective. It is possible that treasuries sell off in the short run... though so will everything else
  - SnorkelTan 3y ago
    It's more complicated than that. I'm not a finance insider, but I'd imagine the real damage from this lies in the derivatives market. Finance is to tightly interconnected these days. Something as bedrock the U.S. defaulting on its debt would probably cause a serious depression that exceeds the great depression.
    - adam_arthur 3y ago
      As I said, “financial crisis and market crash”. Treasury holders will get paid in the end regardless. But the government can continue to service debt by stopping all operational expenses, e.g. furloughing employees. So hitting the debt ceiling does not mean an immediate default
seanhunter 3y ago
3% yield is not telling the full story. Apple's 5yr total return is 31% annualized which is pretty decent. https://www.financecharts.com/stocks/AAPL/growth/total-return https://www.financecharts.com/stocks/AAPL/growth/total-retur...
- adam_arthur 3y ago
  Largely due to multiple expansion. So you’re betting on the 30 PE expanding to 40, and so on. AAPL had a PE of around 10 a few times in the 2010s, so 300% of the return since then has been multiple expansion, rather than earnings growth. Returns from multiple expansion are obviously limited the higher the multiple gets. 3% return/year is the implied return if the multiple and earnings stay the same in perpetuity. The multiple can also just as easily go down, keep in mind. Historically, elevated valuation multiples regress to the mean, even if it takes years to do so
  - seanhunter 3y ago
    Agree. To be clear I don't have an opinion about Apple (not having done any research) but it's very unlikely at the current level it would be the sort of thing I would want to go into.

adwi 3y ago

What are some of the stocks you view as fire sales?

phkahler 3y ago
You might like a P/E of 7.14 for XOM - ExxonMobil, but you'd also be betting against EVs taking over the world in the near term (not a bad bet IMHO). The yield is only 3.5 percent, but they have a history of not reducing the dividend so it's conservative. I'd call it a fire sale but the stock price itself hasn't done much overall in 15 years either. You can't fight public perception ;-)
adam_arthur 3y ago
My portfolio is primarily yield focused on a risk adjusted basis. I like PINE here at 10x AFFO, far cheaper than peers like O or ADC, but with similar risk profile. CTO same story. Both around 10% earnings yield, and better positioned than peers for growth. PINE is classic retail net lease, CTO is outdoor shopping centers in the sunbelt. Growth prospects, but also fine if they stay flat and yield 10% in perpetuity Bonds are interesting here, but would need to see wider spreads for higher quality/non-idiosyncratic ones to be compelling. I like and own MPW bonds, which pay 10%+... much safer than the equity. Certain BDCs are a screaming deal if you assume their portfolios can weather a recession well enough. CSWC is one of my favorite more traditional middle market lenders with 13% yield and low leverage. Conservative/smart management. RWAY is one of my favorites here… over 15% yield with room to grow. Venture debt lender, valued at around 0.7x book value. They’ve been lumped in with other Venture lenders whose portfolio quality is very poor in comparison. Lenders can easily blow up in a severe recession if they’re mismanaged or have weak portfolios… but given the banking turmoil, the sector has sold off indiscriminately and more than priced it in for some. PBR.A has a PE around 2-3 and pays 30% a year in dividends. Valuation is low due to political risk from new Brazilian government. For a more speculative play, NLCP pays around 13% yield with 0 debt, and some cash on hand. They own cannabis cultivation/retail facilities. The sector is falling apart due to declining cannabis prices, but we just hit the inflection point recently where pricing is starting to rise again due to competitors dropping out, and I think the fears have more than priced in what’s to come. Not one I’d own longer term due to eventual offshoring of production. These are my more compelling total return plays, but there are many many more that are safer and still yield far higher than AAPL. JEPI is a great one… owns primarily defensive stocks, and pays 10%/year from options income. However average holding PE is around 22, so Im waiting for it to get knocked down into the teens before I go bigger. Same with SCHD
adverbly 3y ago
Are we getting our stock tips in public on the internet now from anonymous sources? That will make things a lot easier for me. Doing actual research myself was kind of hard. /sarcasm
- hnfong 3y ago
  “If shoeshine boys are giving stock tips, then it's time to get out of the market.”

throw0101c 3y ago

> The 10y treasury pays more than 3% risk free […] We'll see about "risk free": * https://www.politico.com/news/2023/05/12/debt-limit-could-crash-congress-summer-break-00096657 https://www.politico.com/news/2023/05/12/debt-limit-could-cr... * https://en.wikipedia.org/wiki/United_States_debt_ceiling https://en.wikipedia.org/wiki/United_States_debt_ceiling :)

adam_arthur 3y ago
Worst case the payments pause for a period, and resume shortly after. But the government will prioritize debt payment over operational expenses, because the consequences of not paying the debt are much higher than furloughing employees. e.g. financial crisis and market crash Not really a meaningful impact from a long term return perspective. It is possible that treasuries sell off in the short run... though so will everything else
- SnorkelTan 3y ago
  It's more complicated than that. I'm not a finance insider, but I'd imagine the real damage from this lies in the derivatives market. Finance is to tightly interconnected these days. Something as bedrock the U.S. defaulting on its debt would probably cause a serious depression that exceeds the great depression.
  - adam_arthur 3y ago
    As I said, “financial crisis and market crash”. Treasury holders will get paid in the end regardless. But the government can continue to service debt by stopping all operational expenses, e.g. furloughing employees. So hitting the debt ceiling does not mean an immediate default

seanhunter 3y ago

3% yield is not telling the full story. Apple's 5yr total return is 31% annualized which is pretty decent. https://www.financecharts.com/stocks/AAPL/growth/total-return https://www.financecharts.com/stocks/AAPL/growth/total-retur...

adam_arthur 3y ago
Largely due to multiple expansion. So you’re betting on the 30 PE expanding to 40, and so on. AAPL had a PE of around 10 a few times in the 2010s, so 300% of the return since then has been multiple expansion, rather than earnings growth. Returns from multiple expansion are obviously limited the higher the multiple gets. 3% return/year is the implied return if the multiple and earnings stay the same in perpetuity. The multiple can also just as easily go down, keep in mind. Historically, elevated valuation multiples regress to the mean, even if it takes years to do so
- seanhunter 3y ago
  Agree. To be clear I don't have an opinion about Apple (not having done any research) but it's very unlikely at the current level it would be the sort of thing I would want to go into.