Irrelevant
Well-known member
You mean like pharmaceuticals?
Anybody Buying Yet? Where’s the Bottom?
- Thread starter NEWHunter
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SAJ-99
Well-known member
Maybe. That is a tough space given the patent protection length. It found healthcare is a convoluted space (link below) and gave up. The Amazon phone was a failure. Alexa gained traction but has competition and is creepy as hell. I think it is a creative and disruptive company, as is Tesla, but eventually cycles run their course. Investors won't pay 80x earnings for the same growth rate it can get for companies trading at 15x. That is the rotation to value we are seeing now.
https://www.cnbc.com/2021/01/04/hav...t-healthcare-is-disbanding-after-3-years.html
Irrelevant
Well-known member
I can assure you they did not give up on pharmaceuticals
Amazon jumps into the pharmacy business with online prescription fulfillment, free delivery for Prime members
Amazon has been quietly building out its pharmacy offering for several years after ramping up internal discussions in 2017 and acquiring PillPack in 2018.
Irrelevant
Well-known member
And it still hasn't trapped the biggest markets yet
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Good point, but you ignore PE at your own risk and companies don't grow to the sky. AMZN shows PE growth of 12% from 2021 to 2022. Not sure that it justifies such a high valuation for growth in that range. But as long as the investors want to place a premium on it, as they have for two decades, I guess it will go up. If these companies hit a bump, the wheels can come off in a hurry (pun intended).
You of course cannot ignore current valuation but at the same time, if you want to own the best companies in the best sectors, you will pretty much ALWAYS have to pay up for it. It's not too often when you can buy a great company with big growth under a P/E of 20. Hell even 30. Especially in recent years with how low the 10 year has been.
And while yes, one could easily list 50 companies with high valuations that are no longer around, one could also list 50 companies that have had high valuations for awhile and are still going strong. Eventually though, yes, high valuations cannot continue forever. Just doesn't happen. Even so, I would just about always rather own higher P/E, quality companies (not all REALLY high P/Es) with good growth versus lower P/E, stagnant companies. GM is a poster child for that. IBM and XOM are a few others. For many years, GM had a P/E under 10 and did absolutely nothing. It's done better as of late but it has been dead money for the last decade. With that said, that might change in a big way if their push into EVs pans out.
Diversification and positioning is of course a big factor too. A person should never have a portfolio full of high P/E stocks. Even if you have 20 stocks but they're all high growth and high priced, you will get pummeled in major pullbacks or bear markets.
My biggest point is that if you solely rely on P/E, you are severely limiting yourself.
SAJ-99
Well-known member
Sorry, I misunderstood. The way I was looking at it, having an online pharmacy and being in the pharmaceuticals business were different things. Getting into the mail order Rx business isn't a huge leap for a logistics company. Most recurring Rx is done via mail order now. Insurers require it a lot of cases. My point is that you can compare Amazon buying PillPack to Cigna acquiring Express Scripts (not exactly the same buy close enough for comparison). Amazon's PE is 70x and Cigna's is 10X. The core business (Rx delivery) is growing at a steady rate. So will Amazon's execution by 7x better? Amazon's multiple, which is determined by investors, is a currency. Amazon focused on top-line revenue growth for years, and still does. It can do still do that if it investors continue to assign a premium to the valuation, but growth in bottom line net income is going to get harder. Going into different markets like India is fine. Other companies have done the same thing (SBUX is a good example). The problem is eventually you run out of markets. I guess until Elon start to populate Mars, that would give them one more place to go. I don't know when the tipping point is for these companies to no longer command the "innovation" or "disruption" multiple, but it happens eventually. Right now all business in every industry is about consolidation (vertical and horizontal) and eliminating the small players to capture those profits. Mom-and-pop shops are going extinct and will until the government steps in and changes the rules.I can assure you they did not give up on pharmaceuticals
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Amazon jumps into the pharmacy business with online prescription fulfillment, free delivery for Prime members
Amazon has been quietly building out its pharmacy offering for several years after ramping up internal discussions in 2017 and acquiring PillPack in 2018.www.cnbc.com
SAJ-99
Well-known member
Exactly. Just buy the index and own them all. Unless you have the ability to tell me when GM is going to go up 35% in 3 months and TSLa is going to go down -2% (YTD returns for each). If you can do that, you will be rich.
Irrelevant
Well-known member
While I'm sure you will continue to provide examples to support you case. I think you're grossly missing the big picture. Cigna is a 84B company that doesn't connect to damn near every house in America, let alone other countries. It doesn't own it's distribution fleet. It isn't "THE" name in it's industry. Heck, I they insure me and I didn't know they shipped/sold actual medicine.
The US spends 500B annually on medicine. I see zero reason's why Amazon won't control the vast majority of those sales in 20 years. And that's just one small branch of the Amazon. But feel free to bet against amazon. I won't.
SAJ-99
Well-known member
I'm not betting against them. I'm just not going to overweight them at this valuation. Disagreement is good. Nothing more dangerous than a consensus. I just think the government is not going to let a single company take too much of any piece of the healthcare industry. And I might be wrong.
$SENS related.
Decent overview article by Seeking Alpha.
Decent overview article by Seeking Alpha.
noharleyyet
Well-known member
SAJ-99
Well-known member
You ever put on anything in GME?
No. I like volatility though GME can flip a sailboat! I looked at possible limited risk option spreads though... $$$ the anticipated movement either way has my hobby working 5k out of that league even for a single leg, not that I dare play a single.
SAJ-99
Well-known member
Agree. 50 pt put spread (200-150) expiring Friday is still almost $2000.
Edit... wiped all the screen pics.
Kept viewing the call side of the NKE strangle and... well, a couple stock friends are playing through earnings for NKE. Very bullish!
Playing through earnings is, heck, hard to sleep waiting for market open to sell and cry or... figured I'd play with a safe-r angle than a single leg bull ride call.
Tic toc... how to play this... getting cold feet after a good day of green.
Kept viewing the call side of the NKE strangle and... well, a couple stock friends are playing through earnings for NKE. Very bullish!
Playing through earnings is, heck, hard to sleep waiting for market open to sell and cry or... figured I'd play with a safe-r angle than a single leg bull ride call.
Tic toc... how to play this... getting cold feet after a good day of green.
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SAJ-99
Well-known member
Straight long NKE. Love the company, hate the valuation. Thought about selling covered calls, which I have done a lot as it went up (probably cost me money in long run), but I didn't. Will see what earnings brings. They have been putting up good numbers and will hold long until I see a hiccup. If my luck is any indication, earnings will be bad and stock will tank.
