The stock market

[Brock Beauchamp]

 

Interesting. It has beaten consensus earnings expectations in 3 of last 4 quarters, meanwhile the stock is down 8%.
That's all because people are worried about cord cutters?

I think so, yeah.

 

I mean, it's not entirely out of the ordinary for the market to punish a stock over the short- to mid-term for silly reasons. Look what it did to Apple for 6-9 months. At one point, the stock was down 35%.

[Mike Sixel]

Disney just bough a portion of the MLB streaming company...a company poised to stream a lot of other sports, imo. I still like Disney, and yes, ESPN is the only reason they are getting "killed" right now.

[Willihammer]

I think so, yeah.

 

I mean, it's not entirely out of the ordinary for the market to punish a stock over the short- to mid-term for silly reasons. Look what it did to Apple for 6-9 months. At one point, the stock was down 35%.

Are they silly though? I mean, after googling a bit, it looks like cable network revenue accounts for about 1/3 of ESPN revenue. It seems reasonable that as subscribers fall and ESPN is forced to stream cheaper content its margins will fall and so will its growth opportunities, at least in that segment of its opps. Similarly with apple people saw phones reaching saturation and started scratching their heads and asking "where is the growth going to come from?"

 

But, so far it looks like neither company's top or bottom lines have been hard hit, so I'm gonna take a closer look. (I already own enough APPL).

[Willihammer]

Yeah DIS does own HULU and now bought a 33% stake in BAMTech (MLBAM parent co), so it would seem to be somewhat hedged going forward. It did cost 1 $Bil to get the 1/3 slice of BAMtech.

Also saw that they just opened a new Disney park in China that they expect to be a cash cow.

[Brock Beauchamp]

 

Are they silly though? I mean, after googling a bit, it looks like cable network revenue accounts for about 1/3 of ESPN revenue. It seems reasonable that as subscribers fall and ESPN is forced to stream cheaper content its margins will fall and so will its growth opportunities, at least in that segment of its opps. Similarly with apple people saw phones reaching saturation and started scratching their heads and asking "where is the growth going to come from?"

But, so far it looks like neither company's top or bottom lines have been hard hit, so I'm gonna take a closer look. (I already own enough APPL).

It's not silly to punish them a bit because ESPN is a vital part of their operation but the extent of that punishment is out of line.

 

Disney continues to grow despite ESPN floundering. That doesn't jibe with the 25%-ish drop Disney has seen in the past six months.

 

I can understand the market doing something like that to, say, Amazon. Their P/E is waaaaay out of line and the stock price is based on future growth. If that growth falters, the stock can and should suffer mightily for it. But that's not the case for either Apple or Disney (particularly Apple).

[Brock Beauchamp]

 

Yeah DIS does own HULU and now bought a 33% stake in BAMTech (MLBAM parent co), so it would seem to be somewhat hedged going forward. It did cost 1 $Bil to get the 1/3 slice of BAMtech.
Also saw that they just opened a new Disney park in China that they expect to be a cash cow.

I think Disney will make back that money within a year or two. It was a brilliant purchase.

 

BAM doesn't only stream MLB games. They have several clients already on board, including HBO Now. It's already a profitable enterprise and will only become moreso in the near future.

 

I liken this to Disney's purchase of Lucasfilm. Within a year or two, people will be asking "How'd they get that company for that little money?" Marvel was more of a risk, as it was an untried concept and Marvel itself was recently removed from a corporate collapse. But Lucasfilm was rock-solid and already printed money. With Disney's help, they were a virtual lock to start printing 10x more money within a few years.

[Brock Beauchamp]

An interesting footnote about Disney is that their two most successful purchases of the past decade - Marvel and Lucasfilm - became media goliaths through self-funded projects.

 

The general rule in Hollywood is "never use your own money".

 

But George Lucas did just that when he decided he wanted to sever all creative ties with the studio system and self-funded The Empire Strikes Back. Many people thought he was crazy but Lucasfilm wouldn't be the monster it is today without that decision. There's no freakin' way a studio would have allowed Lucas to charge forward with that script, as it broke all conventional thought about film sequels. The movie ended up defining the Star Wars franchise.

 

Marvel, through an odd brokering of a deal that excluded Iron Man from a funding package they negotiated, decided that Iron Man was the best character to launch their studio so they funded the movie themselves.

 

Sometimes, I guess bucking convention and doing it your own damned self can reap huge rewards.

[Mike Sixel]

Just when I thought we might be nearing the inevitable sell off.....I hope you all bought Shopify!

 

I doubled down on Tesla yesterday after it dropped 5%......

[Willihammer]

I'm thinking about a long term call option on Shopify. Feels a little speculative to buy outright and the long term (exp Apr 2017) are reasonably priced IMO. I just don't know enough about it and am leary of pulling the trigger on a co. with negative earnings, but its top line growth has been impressive.

[Willihammer]

This environment prompted my first short sale. I'm worred about stagflation and/or price shocks if/when the Fed acts on rates again. My ass at least a bit covered holding ~20% of my portfolio short. Obviously it will just eat into gains if I'm wrong.

[Mike Sixel]

 

I'm thinking about a long term call option on Shopify. Feels a little speculative to buy outright and the long term (exp Apr 2017) are reasonably priced IMO. I just don't know enough about it and am leary of pulling the trigger on a co. with negative earnings, but its top line growth has been impressive.

 

Options are interesting.....I consider them gambling for the most part, unless you are hedging.

 

Workday is also interesting, but IMO riskier.

[Mike Sixel]

 

This environment prompted my first short sale. I'm worred about stagflation and/or price shocks if/when the Fed acts on rates again. My ass at least a bit covered holding ~20% of my portfolio short. Obviously it will just eat into gains if I'm wrong.

 

I admit to considering this recently also, or some variant. But, I have not really figured out what I'd do yet. Guess I should look at it more. 

[gunnarthor]

 

Just when I thought we might be nearing the inevitable sell off.....I hope you all bought Shopify!

 

I doubled down on Tesla yesterday after it dropped 5%......

Yeah, I'm probably going to buy 5500 of Shopify in my IRA.  It seems like a solid buy.

[Mike Sixel]

I wish I had listened to myself....could have a lot more money right now. But I diversified instead.....sigh. 

[gunnarthor]

 

I wish I had listened to myself....could have a lot more money right now. But I diversified instead.....sigh. 

It's amazing how much smarter we are in hindsight.  

 

[Willihammer]

 

I hadn't put much thought into Shopify but, yeah, you make some good points.

 

Though I'm loathe to invest in more tech... I'm already dangerously tech-heavy (unsurprisingly, as my job is in that industry).

Not sure who first coined the phrase but Buffett talks about the  "circle of competence".

Basically the theory is, stick to what you know.

 

An interesting counter-argument to diversifying for the sake of diversifying I think.

[gunnarthor]

 

Not sure who first coined the phrase but Buffett talks about the  "circle of competence".

Basically the theory is, stick to what you know.

 

An interesting counter-argument to diversifying for the sake of diversifying I think.

Yeah, I've read about that, as well.  It makes sense - esp for "small" investors which most of us probably are.  When you invest your money, you should have an idea about how the company works. 

[Willihammer]

I'm looking at Panasonic as a safer alternative to Tesla. Panasonic appears to be the exclusive supplier of batteries for Tesla's cars, they have a $1.6b stake in the gigafactory. My concern is that the increased volume won't be enough to make up for slimmer margins. Thoughts?

[Brock Beauchamp]

 

I'm looking at Panasonic as a safer alternative to Tesla. Panasonic appears to be the exclusive supplier of batteries for Tesla's cars, they have a $1.6b stake in the gigafactory. My concern is that the increased volume won't be enough to make up for slimmer margins. Thoughts?

Interesting, I hadn't really thought of Panasonic. I suspect the margins will become increasingly thin on batteries but there's a lot of money to be made in that arena.

 

But, given how Panasonic is a pretty massive conglomerate, will the battery business move the needle for them?

 

*shrugs*

[Willihammer]

I'm struggling to find another Buffett quote but it goes something like "imagine you have been dealt a hand of 20 cards and must burn up a card with each stock you buy." Basically saying that when you move, move big.

More or less the opposite of the dollar-cost averaging method which says to buy on a regular schedule.

Edited September 6, 2016 by Willihammer

[Willihammer]

 

 

Interesting, I hadn't really thought of Panasonic. I suspect the margins will become increasingly thin on batteries but there's a lot of money to be made in that arena.

 

But, given how Panasonic is a pretty massive conglomerate, will the battery business move the needle for them?

 

*shrugs*

Panasonic is projective battery revenues to more than double by 2019, and account for a quarter of their overall revenues. I'm not sure how realistic that is owing to declining margins for lithium battery makers and also I'm not clear on the exact terms of their agreement with Tesla. Could they sell lithium batteries produced at the gigafactory to Volkswagen, for example?

[Brock Beauchamp]

 

Could they sell lithium batteries produced at the gigafactory to Volkswagen, for example?

That's a good question, one I don't know off-hand... But I suspect Tesla put in place safeguards to make sure the Gigafactory doesn't supply batteries to their competition, as the Gigafactory is Tesla's ace card in the electric car business.

[Mike Sixel]

I say when you have cash, invest it. Now, if you pay transaction fees, you might want to save up some before doing so.....

 

Buffet is operating on a different stage than we are. 

 

I do strongly agree with "invest in something you know something about", generally.

[Willihammer]

 

That's a good question, one I don't know off-hand... But I suspect Tesla put in place safeguards to make sure the Gigafactory doesn't supply batteries to their competition, as the Gigafactory is Tesla's ace card in the electric car business.

You would think so but from Panasonic's viewpoint, what if the demand for Tesla's cars isn't there? They have 1.6b on the line and another 2.4b they are willing to pledge. But it all hinges on demand for Tesla's cars, which hinges in part, on the cost of the model 3, which gets back to Panasonics markups on its batteries.

[Mike Sixel]

 

That's a good question, one I don't know off-hand... But I suspect Tesla put in place safeguards to make sure the Gigafactory doesn't supply batteries to their competition, as the Gigafactory is Tesla's ace card in the electric car business.

 

You sure? I mean, they give away their patents. They need cash. I think once it is up and running, if they can supply anyone, they will.....

[Brock Beauchamp]

 

You sure? I mean, they give away their patents. They need cash. I think once it is up and running, if they can supply anyone, they will.....

Given how they're struggling to supply their own needs - for example, the PowerWall is back-ordered like crazy and has been for over a year - I don't believe excess inventory will be a problem for them any time soon.

 

They still have almost 400k of Model 3 preorders to fill as well.

[Mike Sixel]

 

Given how they're struggling to supply their own needs - for example, the PowerWall is back-ordered like crazy and has been for over a year - I don't believe excess inventory will be a problem for them any time soon.

 

They still have almost 400k of Model 3 preorders to fill as well.

 

If they could build the cars as fast as they will the batteries....sure. But I'm not holding my breath, even though I bought more stock when it dropped last week....

[Willihammer]

Wow, the learningmarkets presentations are really excellent. There is a lot of free knowledge on that website.

 

Yesterday on the podcast Jagerson talks about the Apple cash pile. He speculates that the market may not be discounting the stock price for the (small) chance that it will have greater tax obligations in the future. He also sees some risk that management could be increasingly distracted with managing its cash as opposed to focusing on its core business.

 

https://www.learningmarkets.com/podcast/

[Mike Sixel]

 

Wow, the learningmarkets presentations are really excellent. There is a lot of free knowledge on that website.

 

Yesterday on the podcast Jagerson talks about the Apple cash pile. He speculates that the market may not be discounting the stock price for the (small) chance that it will have greater tax obligations in the future. He also sees some risk that management could be increasingly distracted with managing its cash as opposed to focusing on its core business.

 

https://www.learningmarkets.com/podcast/

 

Thanks for the link, I'll have to check it out when I get home!

[DaveW]

Not stock market related, but you should all check out betterment.com

 

My returns have been better on there then any traditional brokerage firm, and thy also have the lowest fees I have seen(0.15%, plus every time I refer someone I get 6 months free)

 

Basically they have a tighter product/company then your troweprices etc of the world, and the results out pace them by a % or so as well.