Correct about US markets.
But European examples, earnings are all BS. All go back into company. Free Cash flows are awful.
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Not quite. Just some random examples:
BMW has a dividend yield of 5%, BASF of 7.2%, MBG of 6.8%, VOW of 7.3% (but yes, they (VOW) have some issues as well). But yes, they reinvest on top of that a lot into their companies. I like that.
Maybe you look into the wrong direction?
There is a bit of negativism around just now. I mark my portfolio to market at the close of trading each 31 March. I have 16 NZ holdings and 1 AU holding and all are currently in positive territory since 1 April except a small holding in RAD, and I have quite an amount of dividends as well over that timeframe. So it isn't all doom and gloom.
Jarden are only paying 4% on my call accounts so not as generous as Craigs above. But the (relatively risk free) call interest rate is significant enough now to be (or should be) a factor in most investors equation, as essentially the market needs to deliver more than that over time.
Hi BP
Hi Hoop, cheers for that. Scary PE ratios, isn't it? Umm..Yeah maybe..One has to remember this scenario could carry on for many years.
One thing which baffles me is that despite these astronomic PE's of some US indices many big companies trade currently at single digit PE's. Yes agree. The chart is an index measuring Wall St as a whole so yes there will be many companies that have a lower PE. Note though PE is a short term measure, PE(10) is designed as very long term (secular) inflation adjusted smoothing measure so the values will be different. At the Wall St close this morning (NZ time) the S&P500 PE Ratio is 25.37.....again looking at that 150 yr chart there was a 100year period (1898 to 1998) where the PE never went above 25 yet in May 2009 it went to 123.73. Note: (not mentioned) early dates the S&P500 was assessed.
Personally more following European stocks, and many of them are currently at absolute bargain prices, e.g. Heidelberg Materials (think FBU just 10 times bigger) trades currently at a forward PE below 8; Mercedes Benz trades at a forward PE below 6, Daimler Trucks below 8 - and they all make sh*tloads of money - Year after year after year. PE is a crude measure and I'm cautious of any low PE stock..so DYR is advisable. Where I can I use long term PE Ratio charts.I look at a long term PE chart for that individual company then look at the long term PE chart for the sector that the individual company is involved in. This may give me an indication.
well, not Tesla, but hey - I said good.. Yeah last year was bad for Tesla but this year it's share price is more than double with a current PE of 78. It's another Amazon that makes a face value PE Ratio a mockery.
OK - not wanting to discuss here the benefits of individual European companies, but just wondering - you clearly expect the FANGS to deflate at some stage - and for sure they will take the US indices with them. The question is - what would that mean for all the great companies which are currently available at bargain prices?...Looking forward, who knows what the FAANGS have in store for us..This sudden Industrial Revolution (IR) leap (some say it's a new IR so its IR4) has and is going to disrupt many industrial sectors. Anything involving tech will have to embrace these new technologies very quickly. Interesting to note that when AI news broke out in the media the FAANGS were already in the process of employing this technology or already using it, or making it..So..it seems they have a jump on other companies at the moment. Some companies at Bargain prices? Always be some out there just difficult to pick the winners within the ongoing disruptive environment. I won't solely rely on low PE companies though as there are a lot of moving pieces in play.
I always remember the Dotcom bubble burst. The NZSE was mostly immune and most companies within the index rose yet the NZSE index fell quite sustainably due to the one heavy weighted company in the index. Telecom was the culprit and there were great discussions at the time that Telecom should be removed from the index.
A good chart to see how the FAANGS and other heavyweights affect the New York Stock Exchange index is to chart the percentage of companies within the index that have there share price above their moving average.. I use 50 MA and 200MA. Try it here at Stockcharts website. Type in $NYA200R...At this moment there are 55% of companies trading above their MA200.
Must go and do some work..All the best
Hoop
Another great post Hoop.
Amazon I think may come undone with the likes of Temu and other Asian platforms expanding. I realise Amazon is pivoting more towards tech and perhaps more of a Tesla style company but when are they ever going to justify their valuation?
AI could also finally challenge the likes of Google as the dominant search engine where every major tech company has their own version powered by AI.
Interesting times & AI being the white collar revolution won't allow the time for many to adjust. This will be the great disrupter.
I think physical roles will become more secure and pay will go up over time. It's something that AI can't do and there's an aging population which means that most people can't do them either.
I see Joshuatree gets 5.65% with his broker oncall that is better than short term term deposits at ANZ. My Rabo call account is currently 4.25%
Have recently cottoned on to the NZDX but a lot of the maturities are far into the future so I assume the idea would be if sharemarkets fall, interest rates fall, bonds go up (especially long dated bonds with a good yield). A liquid bond market allows you to sell and buy shares if you want.
Liquidity or easy money might be a problem one day if you want to get out of bonds but I guess this is unlikely with the people we have in charge of the money supply.
Infratil bonds all touching 7% obviously bond holders have less faith in the company than the shareholders on this site.
yes I have been buying IFT bonds at 7%ish....
Cant see what would blow them up... but you never know.
Should be some decent upside for the long dated ones if there is a recession and interest rates head back down. Ask anyone (landlords mainly though) and they expect rates to drop dramatically over the net couple of years. I prefer this bet as opposed to equities at the mo. Will switch back to equities if the situation changes.
Lots of companies on my watch list getting taken to the woodshed at the mo. SKC and STU on the NZX and OML, SSG, QIP, AVG on the asx have hit my buy price (and some others Im embarassed to mention). Im trying to wait for recession to wash through first.
People with negative bias on the market or with current valuations will always love Bearish sounding posts ...but did markets collapse when we went down last time ....No they didnt and neither they will ...Keep analysing charts and ratios to justify bearish bias ...but reality is that long term investing is done best when most are bearish ....I get and got before also ie June last year the impression that experts love to be bearish ...but they keep forgetting markets keep climbing walls of worries and bearishness ....
I am very bullish ahead for markets per se ...especially NZX50G