US shares

[ADrunkenMarcus]

You may believe that my spreadsheet nonsense above is the work of a madman, and that Visa will recover to $200 and beyond and that £ won't ever hit $1.4 again. But I'm trying to understand my possible returns, completely omitting any CoronaVirus fears as such

It's entirely possible the £ will go much higher than $1.40 at some point, too. However with a company like Visa I think the growth will be so strong you'll still get a good result.

Best wishes

Mark.

[simoan]

People we probably think I'm being stupid with this train of thought. I'm using Visas SP in my hypothesis (though this could apply to many US stocks I guess). I'm then roughly calculating the CAGR of the SP growth through 5 year Obama year (Jan 2012-2017) about 26.6%. Then CAGR of growth thro DJT years of Jan 2017-2020 = 32.3%. Then I assume I purchase e.g. VISA @$140 at FX of $1.15/£ and assume future scenarios with a partial recovery under DJT to $200, and comparing to a scenario where DJT loses and we return to POTUS and economic style (tax and fed rates) more aligned with Obama. This would give my guess of a VISA SP of $166 forecasting in reverse to Jan 2020. I've lobbed these values in a sheet. I'm now curious as to worse case scenarios if the SPs of these firms doesn't recover at supercharged (low tax and rates) rates.



You may believe that my spreadsheet nonsense above is the work of a madman, and that Visa will recover to $200 and beyond and that £ won't ever hit $1.4 again. But I'm trying to understand my possible returns, completely omitting any CoronaVirus fears as such.

Matt

Matt,

I'll be blunt, you are price anchoring and performing this type of calculation right now is a complete waste of time. Please don't anchor on share prices, particularly in the current environment because they are nothing but a historical artefact. If you don't think share prices can halve again, you're not thinking hard enough and considering the consequences. Some of us invested through the financial crisis. Never forget, you need a 100% gain to get back a 50% loss. Cash is king, don't squander it. The time is not now.

All the best, Si

[TheMotorcycleBoy]

People we probably think I'm being stupid with this train of thought. I'm using Visas SP in my hypothesis (though this could apply to many US stocks I guess). I'm then roughly calculating the CAGR of the SP growth through 5 year Obama year (Jan 2012-2017) about 26.6%. Then CAGR of growth thro DJT years of Jan 2017-2020 = 32.3%. Then I assume I purchase e.g. VISA @$140 at FX of $1.15/£ and assume future scenarios with a partial recovery under DJT to $200, and comparing to a scenario where DJT loses and we return to POTUS and economic style (tax and fed rates) more aligned with Obama. This would give my guess of a VISA SP of $166 forecasting in reverse to Jan 2020. I've lobbed these values in a sheet. I'm now curious as to worse case scenarios if the SPs of these firms doesn't recover at supercharged (low tax and rates) rates.



You may believe that my spreadsheet nonsense above is the work of a madman, and that Visa will recover to $200 and beyond and that £ won't ever hit $1.4 again. But I'm trying to understand my possible returns, completely omitting any CoronaVirus fears as such.

Matt

Matt,

I'll be blunt, you are price anchoring and performing this type of calculation right now is a complete waste of time. Please don't anchor on share prices, particularly in the current environment because they are nothing but a historical artefact. If you don't think share prices can halve again, you're not thinking hard enough and considering the consequences. Some of us invested through the financial crisis. Never forget, you need a 100% gain to get back a 50% loss. Cash is king, don't squander it. The time is not now.

All the best, Si

I understand your point that SPs could halve again. I've read "The Black Swan". Yes SPs could quarter in value. Wow - tomorrow is another day. Who know's cv-19 could mutate to a much more deadly form. Ebola could mutate to an airbourne form. Russia might nuke Saudi Arabia.

Price Anchoring? You must be thinking of someone else. Whilst I *know* that you have had much much more time in this game, in the past 2 years, I've bought just for example:

NXT: First at £56, then at £47, then at £67
GAW: First at £28, then at £29, then at £63

Is that really price anchoring? You tell me.

I don't believe my earlier calculations were price anchoring whatsoever. No way, Jose. Just attempts to manage my risks, I agree they (my calculations) aren't flawless, but as you've pointed out one shouldn't squander one's cash. And finally I agree the time to buy is probably not now. But neither you nor I know that categorically. This evening - an announcement may be made about a breakthrough in both a cure and vaccine. Tommorow, there could be announcement stating big declines in death rates in the UK, US, etc. etc. Much of what we know *right now* will be historical artefacts tommorow.

thanks Matt

[simoan]

I understand your point that SPs could halve again. I've read "The Black Swan". Yes SPs could quarter in value. Wow - tomorrow is another day. Who know's cv-19 could mutate to a much more deadly form. Ebola could mutate to an airbourne form. Russia might nuke Saudi Arabia.

Price Anchoring? You must be thinking of someone else. Whilst I *know* that you have had much much more time in this game, in the past 2 years, I've bought just for example:

NXT: First at £56, then at £47, then at £67
GAW: First at £28, then at £29, then at £63

Is that really price anchoring? You tell me.

I don't believe my earlier calculations were price anchoring whatsoever. No way, Jose. Just attempts to manage my risks, I agree they (my calculations) aren't flawless, but as you've pointed out one shouldn't squander one's cash. And finally I agree the time to buy is probably not now. But neither you nor I know that categorically. This evening - an announcement may be made about a breakthrough in both a cure and vaccine. Tommorow, there could be announcement stating big declines in death rates in the UK, US, etc. etc. Much of what we know *right now* will be historical artefacts tommorow.

thanks Matt

In your previous post you asked whether anyone thought you were being stupid thus:

People we probably think I'm being stupid with this train of thought. I'm using Visas SP in my hypothesis

All I was doing was telling you that you were being stupid. If you use a share price as an input to any hypothesis, then that hypothesis can only ever be highly flawed by definition. Any process that uses a share price as an input is a form of anchoring. It's currently impossible to value any individual share because the future has never been more uncertain and the future will not necessarily be a repeat of the past.

What' more in a previous post you wrote this which was the basis for your $140 input:

However, seeing as Visa have almost hit $140, and noting a recent peak of $214, then if I assume a recovery to $200 at some stage in the next year or two, I will see 43% stock price upside.

That's price anchoring, front, left and centre!
All the best, Si

[TUK020]

That's price anchoring, front, left and centre!
All the best, Si

I'm confused. Surely that's rearwards price anchoring?

[TheMotorcycleBoy]

Si, with all due respect, and this is coming from me with my 2 whole years of investment but 52 years experience of life I believe you have become a tad obsessed with this anchoring thing!

Anchoring can, be good, it can be bad, IMO. Its clearly bad if it stops you updating your thesis and buying again if the price is like 25% higher than the when you last bought. But its not bad if use it to stop yourself overbidding for a motor at an auction. Dont tell me "shares are different". You can buy "lemon" cars too! Risks and returns.

Thing is, if you ask me, sometimes you gotta know when to anchor! So how do you, Simon, know when to cut a loss on a tanking share e.g. BUR or FEVR? You set an anchor! Where from? Your entry price! Anyway, the first thing people ever say when others talk of trading shares - "buy low sell high". Youve gotta have at least a basic notion of price levels, to do that though, right?

What's going on in today's markets is fun and games for sure. But generally speaking it seems quite explicable: no ones got a clue what the next quarters earnings will be like even with Mr. Trumps tax cut waccy baccy, and the equity risk premium is out of it, smokin' crack.

Matt

[TUK020]

surely a lot of this boils down to whether your reference figure is plucked from an arbitrary point in time, or as part of a trend.
In one case one can use the term 'anchoring' in a disparaging fashion, in the other one can talk about mean reversion.
All depends on what one thinks the underlying business can justify in the longer term earnings

[TheMotorcycleBoy]

More on Visa. SP down to $135.

Apparent tidings of panic and chaos for credit card earnings

https://www.thestreet.com/investing/cre ... nings-drop

But good news for Pepsi:

https://www.thestreet.com/investing/pep ... an-stanley

Perhaps people think it contains a covid-19 cure!

[servodude]

Perhaps people think it contains a covid-19 cure!

Well they do make Tonic water

- sd

[TheMotorcycleBoy]

Perhaps people think it contains a covid-19 cure!

Well they do make Tonic water

- sd

Duuh!! That's for malaria!

[redsturgeon]

Perhaps people think it contains a covid-19 cure!

Well they do make Tonic water

- sd

Duuh!! That's for malaria!

https://www.bloomberg.com/news/articles ... is-lacking

Tell that to Trump.

John

[flyer61]

Here's another list of US shares that are getting the slide rule treatment. Any comments would be gratefully received.

Advanced Micro Devices
Capital One
Lennox International
Burlington Stores
Zimmer Biomet
Norfolk Southern Corp
HCA Healthcare
Ross Stores Inc
Merck and co Inc
Square Inc
TJX Co
GrubHub

[ADrunkenMarcus]

Very happy with my PayPal purchase on 30 April!

[TheMotorcycleBoy]

Very happy with my PayPal purchase on 30 April!

That's sounds like a goodie, Mark. I personally wish I'd taken the plunge a month ago when Visa were cheap.

I bought Cisco (CSCO) a couple of weeks ago. I can't help but believe that in the long term computer networks are going to grow and grow. They currently come in as being reasonably cheap, pay about 3.45% Div and including their liquid money investments are cash rich.

They seem to be very focussed on optical networks and various "next generation" networking, and possibilities/research in optical switching+routing.

Matt

[1nvest]

If you could buy just one US share what would it be?

Just one share! Other than BRK-A, it would have to be a scripophily choice.

[1nvest]

My current angst re. buying anymore US shares, is that the SP500 is flying so high right now. I'm wondering if a small correction is in the post.

Matt

The Fed are buying up corporate bonds in massive amounts. Driving yields down/prices up. Pension ...etc. funds that target say 60/40 stock/bonds with bonds being up will rebalance by selling bonds (likely to the Fed) to buy stock. All the time there's a big player who can legally print/spend money buying, so prices will stay high/rise. As they say, don't fight the Fed. 'Infinite QE' looks to be limited to around $8 trillion potential as the Fed has set a upper limit of 70% maximum of any one Corporate bond issue being bought.

[1nvest]

2) US dollar vs Sterling. I've long held the view that over the long term sterling will decline against the dollar. America has a big advantage with the world using the dollar as it's reserve currency and safe haven, whilst Britain is addicted to devaluing its currency and running a current account deficit. I see nothing to change this. The rise of China will make more people nervous, favouring the dollar. Short term, I haven't a clue. I recently moved some dollars back into sterling at just below $1.20 to £1, but that was driven more by the need to raise cash to take a big punt on central London property.

As part of end of (fiscal) year rebalancing I added $ from the proceeds of reducing gold (gold up +20% relative to the $). Some of those $'s (a chunk was also transferred over to £ at around a 1.22 £/$ rate also as part of rebalancing) have since remained idle in my account as I had expected things to be worse than the -10% decline (in $ terms, -6% in £ terms) that US stocks have seen across Corona virus. As/when invested, as ever I'll just go with a broad US stock index tracker rather than single stock(s).

Broadly longer term, even just holding 50/50 US$/gold and yearly rebalancing would have offset UK inflation. The relative decline of £ isn't a linear type decline, is instead quite a volatile motion. Primary reserve currency ($)/global currency (gold) similarly fluctuate in a volatile manner. 50/50 hard $ currency and physical gold is what I consider to be a Jason Bourne choice, can be completely off the radar whilst (very) broadly not losing purchase power over time ...

Red line : UK inflation
Blue line : 50/50 yearly rebalanced US $/Precious Metal (in £'s)



Annoyingly you can't hold foreign currencies inside ISA, so that can mean having to multiple trade (shift things around between inside and outside of ISA). I do wish they'd change that rule, seems daft that you can hold foreign currencies within SIPP's but not within ISA's.

More usually, rather than sitting on hard $ currency, investing those $'s is more appropriate https://tinyurl.com/y9lb6hr5 I pigeon-hole 50/50 $/gold as a form of barbell, that converges to a central currency unhedged global bond bullet type holding https://tinyurl.com/y8qoye9e that is less exposed to withholding taxes (more cost/tax efficient than a unhedged global bond holding).

[Lootman]

If you could buy just one US share what would it be?

Just one share! Other than BRK-A, it would have to be a scripophily choice.

You would probably buy the B shares, as many cannot afford even a single A share. They are $265,000 each!

[1nvest]

many cannot afford even a single A share. They are $265,000 each!

I hold a remainder single A series (did hold several), bought for < £50,000 each around 12 years ago. I also hold some B series as well. Helps reduce US withholding taxes as part of overall "US stock" exposure.

[ADrunkenMarcus]

Very happy with my PayPal purchase on 30 April!

That's sounds like a goodie, Mark. I personally wish I'd taken the plunge a month ago when Visa were cheap.

I bought Cisco (CSCO) a couple of weeks ago. I can't help but believe that in the long term computer networks are going to grow and grow. They currently come in as being reasonably cheap, pay about 3.45% Div and including their liquid money investments are cash rich.

They seem to be very focussed on optical networks and various "next generation" networking, and possibilities/research in optical switching+routing.

Matt

Cisco seems worth a look, I'll check them out.

I bought Paypal on 29 April, in fact, so I was off by one day when I quoted from memory. The book cost in Sterling terms was just under £101 and it recently hit over £119: a return of over 18 percent. The £ weakened slightly against the $ and PayPal's share price shot up like a rocket after results were released. I think there is a strong argument, as the PayPal CEO said, that the current crisis has accelerated the trend towards electronic payments by about five years. MasterCard will also benefit from this. Indeed, many MasterCards are linked to PayPal accounts!

It is scalable - their expenses do not increase in proportion with additional user accounts or increased payment volumes, so there is scope for margin expansion IMHO. They also added a huge number of new accounts in April 2020 and report that 1 May 2020 was their best day yet, better than the last 'Black Friday' (I hate that term - and the concept!)

Best wishes

Mark.