Honestly, the last few days or weeks have been nothing but crazy in the US markets. First, the huge market sell-offs bringing down the best of the blue-chip stock prices to double-digits(%) lows. Yes, I am talking about Microsoft, Apple, Google, FB, Amazon, NVIDIA, and AMD amongst several other quality picks.
Almost all of the YouTuber’s, with Millions of followers, and huge channels/subscriber base were considering a global recession/market crash evident.
Then we had the earnings sessions, as always it’s a series of good and bad days. While the markets cheered for excellent results from Apple, Google, Amazon, and Microsoft; Netflix and especially Meta (FB) results were extremely bad. I still don’t feel the results were that bad, to be honest, Meta lost a 1M subscriber base in NA territory, but their ARPU elsewhere including US & Canada was substantially good. I agree with the point that the company and its family of apps have reached a point of saturation with 3B+ users worldwide. But the stock’s now trading at less than 17 PE, which with revenue of 32B+ per quarter is extremely low. Also, the revenue across the apps are consistent. I don’t think Meta will doom or fade away.
Remember, Meta commands almost 20% of digital ad revenue, next only to Google.
Moving on with other results, Alphabet’s 20:1 stock split bought a lot of uproar from the likes of Jim Cramer to everyone around. Also, the results were crazy good. The stock jumped ATH after hours. The stock has since retraced back to the 2800 levels (from $3000+).
One thing to note here is that the market does not have a clear direction, from what I can see.
On days we have this huge percentage gains, for example – Alphabet’s results, Amazon’s results (after hour spike I mean, huge in fact by 300 points or so), only to correct later and in fact dip in the later sessions or the next day, giving up all the huge gains.
I have two points here:
Is the fed interest rate hike/inflation causing all this market volatility dilemma? or
Is the high P/E multiples of these mega-cap companies sounding crazy, which it is actually. Are we acknowledging this after the huge 2 years or so run-up?
While Microsoft’s P/E is at 32 now (at $305 per share), Apple is at 29 and Google at 25ish.
Amazon’s P/E is still at 50.
I mean, where are we heading to with these numbers? I am as eager as you, watching the market. While Alphabet has given up all its ATH gains post results and trading at $2800s, Amazon has a similar story. Apple is somehow holding strong above $170 levels and Microsoft is just above $300 USD.
Also, looking at Tesla, which is one of my other favorites, it seems to be trading comfortably between $850 – $950.
Hmmm, let’s see where this all ends up. So what’s your plan right now, are you holding cash and waiting for the dip further, or are you DCA’ing? (Dollar-cost averaging your favorite stocks)
Either ways, please remember one thing, be it any of the stocks mentioned in this post or the blue chips you like, they will eventually go up with strong valuation and fundaments. So worry less and stop targetting for the bottoms, instead buy your favorite AAPL on dips and hold tight.
To be more clear, please do not sell stocks in the red. You’ll lose money only when you hit that sell button. The stock market will eventually recover and move north. The beauty of blue chips stocks is that they will always win with the fundamentals they have, no matter what, it’s more of when.
If you ask me personally at these levels, which of the stocks I’ll be more interested/comfortable in picking, I will say all – Microsoft, Apple, Google, Tesla, and Amazon in the below ratio (out of 100):
Microsoft – 30
Apple – 30
Google – 30
Amazon – 5
Tesla – 5
And please don’t get me wrong, I have never liked FB or Meta stock, I have always preferred Google over Meta anyday. And Netflix I don’t like either. It’s just more of a personal choice. Meta and Netflix are great stocks as well.
Regarding the ratings above, Microsoft, Apple, and Google are extremely well diversified and industry/sector leaders, hence the 30% basis points in each is where my dollar goes, with the remaining 5% each to Amazon and Tesla.
Though Amazon had great results, I still feel the company even with AWS at #1 above Azure and Google cloud, not a good investment compared to other blue chips discussed here, in this post. The reason being, dollar hike again in the Amazon premium subscription and extra push towards the consumer pockets. As is the inflation at an all-time high, with a $139 premium subscription is it just fair Amazon? Also, the PE is at 50, I don’t think Amazon stock is fairly valued, with growth projected at 50 times earnings for next year.
Moving on, Tesla is always risky with fantastic future growth potential, and Elon is kind of crazy with his tweets overnight which disrupts the stock. Don’t get me wrong Tesla is a great revolutionary company but with the added risks and one-man show in Elon, it’s a bit risky. I would rather bank my money safe in MFST or AAPL any day.
Always remember, the two most important metrics in the stock reports are FCF (free cash flow) growth and income diversification. Especially the recurring revenue/subscription-based. Apple almost makes $100 Billion dollars in cash or free cash flow every year. And the best part is this is growing YOY. Services revenue is what matters the most in the balance sheet of course along with product sales.
Further, AMD had amazing results too, its PE is currently sitting at 39+ again, so I am expecting some kind of correction here as well. In comparison, though Microsoft’s PE is at 32 now ($300 stock price), I feel safe investing there, with all the product diversification/services revenue, and I am sure my investments are safe, whereas with AMD I am not entirely convinced yet with Intel’s huge expansion plans, to add further.
That’s it for now, remember the market is where money is made, always buy low and sell high, hold quality stocks for the long term to create generational wealth, be it any company you believe in. I believe in blue chips. That’s just me. And do not ever sell quality stocks in red or trade them overnight.
Thanks for reading! Bye now.
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Sagar Sridhar is a personal finance blogger from Canada. His genuine passion for personal finance coupled with his unique style of writing is what stands out. Professionally, he is a computer engineer, agile certified and has a master’s degree in Project Management. His writing has been featured or quoted in the leading Canadian publications such as Credit Canada and many other personal finance publications. While he is juggling between his day job and blogging, he is the main author on this blog and has miles to go before making the final pit stop.