Party shares: Do not fight them – have them

Investing Tips

“If you can not beat them, join them.”

What is Atlantic , February modern version in 1932, described . “famous celebrity”

most people know what this means is a Indiana Sen. James E. Watson’s. If someone finds a way to do something better than everyone else, then someone else should do it the same way. Now, large technology companies are such a huge head start, it is almost impossible to beat them to change the world.

If you can not beat them, then, have some of their own shares.

After a phenomenal bull market, ask most people if they think Amazon (Amazon.com) (AMZN), for example, is a good stock to hold. Who does not have it most people would say that this is too high to buy. Question pushing Wall Street to play the same question, he / she will focus warning AMZN is overbought, the fanaticism, and the valuation must be restored to their means. 

Of course, they say, when a former Amazon’s stock traded around $ 750 per share. It is now approaching $ 1150, which means that in just 12 months, or more than 50%. amazing!

At business school, they teach the current value of a company is the amount of all future cash flows, discounted to the present at reasonable interest rates. It’s a good theory, but it does not explain why the stock will become excessive or undervalued in the market,

Tusk: game-changing today’s

Today’s investment We are familiar with Amazon and hot technology stocks from the past few years ah rest RS. Financial media obsess over them, even to their acronym – online extra clicks airworthiness – fangs. And traditional fundamental valuation, while others are wildly overrated. How that can be?

Larger question is whether they are still in spite of warnings and consensus opinion a good investment.

The answer is yes.

This stock set starts out with Facebook Inc. (FB), Amazon, Netflix company (of NFLX) And Google parent company letter (GOOGL). It evolved to include or replace Apple’s (AAPL), Microsoft Corp. (MSFT) and graphics chip maker Nvidia Corp. (NVDA), the use of acronyms change, such as FAANGs and FAAMGs.

Wild Card people – or, more specifically, their businesses, the economy and their personal finances attitude.

The stock market usually reflects the successes and failures of US companies. However, it is not the reason people think. Indeed, big companies make a profit, the stock to perform better, but it is far from being a direct relationship. A shares will rise, because the company’s revenue is not much, but because investors believe it will be even more in the future revenue.

Party valuations of most stocks (in the form of price-earnings ratio, or P / E, ratio – is simply a price per share divided by earnings per share), far higher than the market Average. Amazon, for example, with gains next year based on the fact it / That compared with 305 reported in the past 12 months earnings astronomical P, the entire S & P 500 I ndex average P / E of about 25 if we look at analysts estimate that Amazon proportion dropped to “only” 150– still well above average 

Is the discounted future cash flows from the Amazon really is nearly 11 times the average of the largest blue-chip companies in the country ? Indeed, a cutting-edge company such as Amazon deserve a higher multiple than the manufacturer of electric tools or parts, but the cream of the crop 11 times the market?

Analysts do not worry, this is too much. They cite other factors, the herd mentality to drive these stocks higher this could be a bubble

However, in the traditional valuation methods seem to stretch fangs, Palash Mishra – Starks is a NEW YORK – Director MAnagement based business consulting firm – said they still dominate in key areas

“Facebook and Google are the largest online advertising player, Amazon dominate the e-commerce and cloud services and Netflix are a leading provider of streaming media and wire-cutting war, the development of content, consumer desire, “he said. “In addition, theseRetail companies are the main beneficiaries of the secular shift; from the store onto the net. Now consumers shop on their phones. And because of their popularity, most of these mobile phone companies to consumers valuable real estate, they do so with just a tap of the business. “

‘They are magical ATMs,’ said Howard Linde Zong, management Stocktwits founder of angel investment holding company leverage social partners, as well as social media platforms trader.” (They) taken from permanent capital advertising / cash flow and brain, artificial intelligence, robotics, mapping, and start-up companies to invest. “

Fear?

Despite his recent letters was about to drive new varieties of capital to labor is forgotten, Joshua M. Brown, CEO of Wealth Management Ritholtz, driving home to bed thinking of today’s leaders.

“robots, automation and software, through its wholly owned, and is constantly accelerating rate of more than slotting new Labor victory,” he wrote. “this in recent years gone parabolic – every industry, in the “

If you are on the wrong side in this trend, the only way out is to” various parts of the country, and around the world to invest in their own destruction. ” in this case, the fan GS is not a gimmick or a fad. they are a life raft.

Of course, there is a need for attention, especially when investors are convinced that this time is different Dr. Robert Johnson, CFA, CAIA, CLF – financial services president and CEO of the American University – Investors are cautioned not to consider the risks and rewards of the window just own a piece of the future in which there is a cancer Secretary cure will be its future cash flows are too costly

There are two ways to play this seems to be an unstoppable trend: a piece of their winners, and sales are being left in the dust of the company

Indeed, in a very old bull that the purchaser of the stock comes with a lot of short-term risk, so you can always revise ho PE. If this happens, many investors will back up the truck. but even if it does not happen, what do you choose? buy shares of the company to compete with fangs? always have art, but in a cool$ 450 million sale of the latest Da Vinci, this may not be an option.

If you can not beat these technology stocks, preferably with one of them. Can understand, correction can and do happen, and treat them as opportunities to buy more.