Investing General Discussion
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Sanrith Descartes
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Daidraco
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Fed lowers the rate by 0.025%
Joe Biden says, 'See that what'cha'ma'call'it dang thing there pal, I lowered the fed rate bud!'
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Sanrith Descartes
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UNH is touching 2.5 year lows. Got some industry-wide bad news on Medicare payments recently. 10-yr historic PE is 20.61. Today's PE is 18.86 (nearly 10% below). It makes tons of money. It ain't flashy or fancy. Buy it, hold it, forget about it for 20 years. If this support level fails it could potentially see a drop to test 400 (another 10% below today's open). This $445-$446 area is a solid entry point for a new position if you want to own this type of stock. Earnings are in 5 days. This will test the current support level. Play the weakness now with an entry sized position, if it misses on earnings let the market over-react and add on that drop. Caveat: This depends on "why" it misses on earnings. If it just misses "expectations" ignore it. If it announces a fundamental issue, then reassess the position.
Full disclosure - I am and have been acquiring it in this price range.
Full disclosure - I am and have been acquiring it in this price range.
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Loser Araysar
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On a 20 year horizon, most of the stocks in this market will make money. Dont buy a stock that's hitting 2.5 year lows. Dont buy before earnings and this is the worst advice of all, dont average down after a bad earnings call.
If you want to buy something for 20 years just buy SPY.
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Sanrith Descartes
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Sanrith Descartes
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Skidded a whole 2.6% from the all-time high. Back where we were 3 weeks ago before we started that last climb to the all-time high a week and a half ago. Still up over 8.5% since the start of the year.
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Isn't this more of a cash flow thing? Like, if you're throwing off ~$20B FCFE a year with modest but consistent growth and ridiculous stability, at some point there's a price low enough where that cash stream is valuable. If your thesis is "this is gonna happen for a long while", the lower the price the better. In 20 years no one will remember that current price either way.
Feels like you're combining short-term and long-term views here.
Mist
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Loser Araysar
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This reads to me like corporate finance is being conflated with retail investment, maybe I'm reading it wrong.
I outlined the issues with averaging down into a downtrending stock here: The Stock Trading and Shitposting thread.
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It's possible. Corporate finance is part of my background, and I definitely can't do the technical stuff most people in this thread do, yourself included.
What I mean is if you value UNH solely based on its cashflows and you thought a consistent growth rate was actually pretty close to the truth for a monolithic insurance company, you would have your eye out for a situation like this.
Absurdly simplified example using FCFE since we can value equity directly. I'm choosing a performance level that makes the math illustrative, not any actual belief:
So if we want to compete with S&P on returns (with a lot more risk), we'd look at a $480ish share price. Right now we're at $440, which would imply the stock is 'cheap'. Who knows why--
Sanrith Descartes
presumably has a hypothesis that it's an overcorrection of the sector applying to the stock. So you pick some up. UNH previously grew cashflow 15% YoYoY. Maybe in the earnings call they only come out 5% up, and the stock tanks further. But that still fits your hypothesis, so you pick even more up at a greater discount.
That's all I'm saying. If your hypothesis is that other people are valuing UNH highly because they expected them to start mining lithium or getting into nuclear power or receive some oligopolistic regulatory requirements, I think it makes sense to be looking for prices that seem to discount a target level of actual operating performance.
Reading the post you linked, I think the reason I wouldn't A. not buy immediately and B. exit and try again is that I'd be afraid the market would realize its mistake and correct up, and I'd miss my chance. Everything's easy to see with hindsight, and knowing you could have done better is probably a good lesson, but pulling out and regrouping only to find the opportunity closed the next day when you're talking about 20 years feels shortsighted in the other direction.
All that being said, I'm the guy who buys SPY for 20 years, so full disclosure that my practical experience here is nil.
Sanrith Descartes
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A number of moving parts.It's possible. Corporate finance is part of my background, and I definitely can't do the technical stuff most people in this thread do, yourself included.
What I mean is if you value UNH solely based on its cashflows and you thought a consistent growth rate was actually pretty close to the truth for a monolithic insurance company, you would have your eye out for a situation like this.
Absurdly simplified example using FCFE since we can value equity directly. I'm choosing a performance level that makes the math illustrative, not any actual belief:
So if we want to compete with S&P on returns (with a lot more risk), we'd look at a $480ish share price. Right now we're at $440, which would imply the stock is 'cheap'. Who knows why--
UNH previously grew cashflow 15% YoYoY. Maybe in the earnings call they only come out 5% up, and the stock tanks further. But that still fits your hypothesis, so you pick even more up at a greater discount.
That's all I'm saying. If your hypothesis is that other people are valuing UNH highly because they expected them to start mining lithium or getting into nuclear power or receive some oligopolistic regulatory requirements, I think it makes sense to be looking for prices that seem to discount a target level of actual operating performance.
Reading the post you linked, I think the reason I wouldn't A. not buy immediately and B. exit and try again is that I'd be afraid the market would realize its mistake and correct up, and I'd miss my chance. Everything's easy to see with hindsight, and knowing you could have done better is probably a good lesson, but pulling out and regrouping only to find the opportunity closed the next day when you're talking about 20 years feels shortsighted in the other direction.
All that being said, I'm the guy who buys SPY for 20 years, so full disclosure that my practical experience here is nil.
UNH and many other health insurers benefited post 'rona from the massive drop in non-life threatening surgeries. That was due as some point to to revert back so there is/was an expectation that their profit numbers had to at some point get back to pre-'rona levels. Its the dominant player in the space and its a space that is growing as we continue to age and grow our population.
LTD (about $60b) is about 2.5x free cash flows and its sitting on a pile of about $25b in cash. Debt is no real concern.
Sales growth was 14% last year but so was SG&A growth. I would like them to rope in expenses in. Overall it has a high quality balance sheet.
I doubt anyone looks at it and questions whether its a quality company or not. Its a question of price. Its trading at a PE of about 18.6, which is a discount of just under 10% to its 10-year average PE of 20.6. At this point with the market where it is, I'm looking for value. This is a sector I like, and a high quality name currently on sale to its 10-year average earnings. I'm scaling in to a full position for a long term hold. Would I be trading it short-term here? No. Especially ahead of earnings. I think a 15% upside from $440 over the next 52-weeks is almost a sure thing. Thats a $506 price target. It was there end of Feb (less than 6 weeks ago). I think 20%+ is much more likely but I will be content with the 15%.
A stock like this balances my portfolio and provides some contrast to my tech positions. Others may think of it differently and my have different investing objectives and timeframes. One of my core investing philosophies is to buy quality when I see it on sale and hold it. With SPY 2.5% below the all-time high, opportunities are few and far between. This stock could screw the pooch on earnings and take another 10% drop. Im not taking a full position just for this reason. If it does I evaluate the earnings report/investor call and depending on what I hear I fill my position on the drop or decide to just hold what I have.
Your mileage may vary.
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