The only tech stock I’d consider buying right nowThis analysis is provided by Eden Bradfeld at BlackBull Research.
We’ve seen the S&P, NASDAQ and every other American index get slammed in the last couple of days. Some people are panicking. A lot of people are panicking. If you go on Twitter (sorry — X dot com) you will find a lot of people who listened to a recommendation from a guy on YouTube about a trash stock like say, IonQ or HIMS, and are now fairly upset said YouTube guy (or Twitch guy, or whatever) got it wrong.
Frankly, a correction is a healthy thing because it allows investors to purchase good companies at more reasonable multiples.
I have no idea where the market goes from here. I can’t see the future. I admit this sell-off has me adding tech stocks (and other American stocks) to my watch-list, and I’ll continue to monitor them.
A lot of tech stocks — the bulk of what has fallen as of late — still aren’t in that zone for me yet. Amazon still trades at a current multiple of 35x earnings and a fwd multiple of 28x — I can’t find much value in that, especially when I consider that Google, a company with +$83 billion in net profit and a 32% operating margin, can be acquired for 16x fwd earnings (I had to check those numbers too just to be sure — when you’ve still got things like Palantir trading “to the moon” (and back), 16x⁴ seems like a reasonable price for the dominant advertising platform in the world).
Here’s Buffett, in his 2008 essay — Buy American, I am:
A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.
Buffett was right, of course. If you purchased stocks in 2008 and held them you would’ve done pretty well (as long as you didn’t buy Lehman Brothers!). The GFC saw stocks fall 48% from their peak — if we are indeed heading towards that territory there is more room to fall. I have no idea — examining the basket of tech stocks I look at, the only one that presents any value is Google. It’s reasonable at 16x fwd earnings. If it traded at 12x earnings, it would be a bargain - in my opinion. How low can you go?