The difference between a bubble and a mania is hard to define, but most of us figure we know it when we see it, to borrow an American judge’s famous summary of pornography. The boom or bubble, according to your taste, in large tech stocks such as Alphabet, Amazon, Apple, Facebook or Microsoft doesn’t seem to pass that test.
We can argue about whether they are overvalued, but they are clearly very valuable. At worst, they should be worth a good proportion of what the market now thinks. Some other trends look more like mania.
Take electric-vehicle maker Tesla, whose share price recently passed $1,000, up from around $400 in January. Its market capitalisation of $200bn is now larger than Toyota’s; its enterprise value is just a third smaller than Toyota and 20% smaller than Volkswagen, and is larger than Hyundai, General Motors or Ford.
Toyota and Volkswagen both make more than ten million from vehicles per year; the other three make six to seven million each. Tesla makes less than 500,000. Simply put, Tesla needs to grow production and market share vastly, or become hugely more profitable than its rivals, to justify its current valuation. That is conceivable, but very optimistic. If it fails, it’s worth a great deal less
Motivational Quote Of The Day
“Arriving at one goal is the starting point to another.”
John Dewey
Alternative Quote Of The Day
“I don’t like food that’s too carefully arranged; it makes me think that the chef is spending too much time arranging and not enough time cooking. If I wanted a picture I’d buy a painting.”
Andy Rooney
Shares We’re Buying This Month
Focusrite, the audio specialist has been enjoying a lockdown boom. A world leader in the hardware and software used to record, mix and edit sound, Focusrite used to sell mainly to the music industry. Yet emerging demand from podcasting, game streaming and online education means that there is more opportunity than ever in this sector. The group enjoys large gross margins, particularly in its software operations. A price/ earnings ratio of 26 is justified by auspicious long-term growth prospects.
Founded in 1993, Caretech today runs more than 500 social-care facilities, looking after children and young adults with complex conditions ranging from autism to anorexia. Staff-to-patient ratios are high and many employees have been with the business for years; indeed, a large number own the shares. Activity remained resilient despite the disruption of lockdown and the company last month hiked the interim dividend by 7%. The payout has also risen every year since 2007.
Sales at the owner of Premier Inn and Beefeater plunged by 99% during the first seven weeks of lockdown, prompting a £1bn rights issue. The funds have provided crucial balance-sheet ballast, yet the money will also be used for future growth and investment. The travails of rival Travelodge suggest that there will be plenty of chances to poach assets in the coming months, while there is scope for Whitbread to grow its market share considerably.
Today’s National Day
NATIONAL AVIATION DAY !
PUBLISHERS NOTICE
Just In…
Hello,
We have just received the email below from one of our customers. I thought you might be interested in what he has to say…
From: John C******* [john********@*****.com]
Sent: 09 August 2020 09:58
To: Admin
Subject: “The Hermes Strategy “
Dear Bill,
Well that was a result —- I certainly wasn’t expecting the system to pay for itself in 2 days with 66/1 shot Star of Emaraaty! I have backed 66/1 shots before, but I don’t think I would have picked this one!
Once again ——Thank You Very Much.
Kind Regards,
John
If you’d like full details on what he is talking about please Click Here
All The best
John