The Long Investor
Let me be very clear here:

This is called exit liquidity so smart money can exit their positions because the rapid decline last week caught them off guard.

- Hot CPI
- US 10 YR rising
- conflict in the Middle East
- precious metals climbing

Was not part of the plan.

Every decline moves in 3 stages

Some call it the initial decline, dead cat bounce and then the final decline

We call it an ABC, 3 wave move.

Whatever you call it, it does not finish after 1 move down.

@fundstrat surprised at your ‘rally’ comment without any context, rally followed by a decline is more appropriate

.@Fundstrat’s Tom Lee on the markets: “Now we just need a positive catalyst. I think as long as inflation tracks better than expected, I think we’re in a good position to rally.” https://t.co/DhzP7tQ5LL - Squawk Box
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 Q-Cap 
$META is expected to make close to half a TRILLION $ in the next 6 years in Operating Income.

Zuck is 39 years old https://t.co/yiYC0x1chF
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Dimitry Nakhla | Babylon Capital®
On July 24 2023, I shared my analysis on $CDNS suggesting it was overvalued at $241💵 & a good consideration at $180💵

Since that post, $CDNS traded to $327💵 ~35% higher and has come down & is now trading for $257💵 after a 9.5% post-earnings drop

$CDNS serves as a prime example of the importance of discipline in investing, even when faced with an exceptional business. By maintaining a level head and avoiding the urge to invest at inflated prices, I avoided an “opportunity cost trap” as $CDNS returned to its original price point

Moreover, recognizing $CDNS's overvaluation presented an opportunity to invest in other high-caliber business with a strong foundation for sustainable returns, driven by fundamental growth rather than mere multiple expansion
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As I stated in my analysis:

“Take a look at the first photo (P/E chart) & you’ll notice the severe multiple expansion in the last decade. $CDNS multiple more than doubled, increasing from ~18x in 2013 to ~47x today

In fact, $CDNS P/E chart almost mimics the stock price chart, implying that the stock price has run up way ahead of the fundamentals

So we must ask, is $CDNS worth a ~47 P/E? ….

While $CDNS is a great business & runs the design software space along with $SNPS (part of the semiconductor ecosystem), I would not want my returns to rely on the premium 47x multiple being maintained while growth likely won’t meet my 2G threshold

I’d take a closer look at $CDNS if it comes down to a 34x P/E, or at $180💵 per share based on today’s fundamentals

If it never gets there, so be it. As a disciplined quality-value investor, I don’t chase stocks that trade well above what I believe is fair value”

#stocks #investing
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𝐃𝐈𝐒𝐂𝐋𝐎𝐒𝐔𝐑𝐄‼️: 𝐓𝐡𝐢𝐬 𝐢𝐬 𝐍𝐎𝐓 𝐈𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐀𝐝𝐯𝐢𝐜𝐞. 𝐁𝐚𝐛𝐲𝐥𝐨𝐧 𝐂𝐚𝐩𝐢𝐭𝐚𝐥® 𝐚𝐧𝐝 𝐢𝐭𝐬 𝐫𝐞𝐩𝐫𝐞𝐬𝐞𝐧𝐭𝐚𝐭𝐢𝐯𝐞𝐬 𝐦𝐚𝐲 𝐡𝐚𝐯𝐞 𝐩𝐨𝐬𝐢𝐭𝐢𝐨𝐧𝐬 𝐢𝐧 𝐭𝐡𝐞 𝐬𝐞𝐜𝐮𝐫𝐢𝐭𝐢𝐞𝐬 𝐝𝐢𝐬𝐜𝐮𝐬𝐬𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭.

𝐓𝐡𝐞 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐜𝐨𝐧𝐭𝐚𝐢𝐧𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭 𝐢𝐬 𝐢𝐧𝐭𝐞𝐧𝐝𝐞𝐝 𝐟𝐨𝐫 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧𝐚𝐥 𝐩𝐮𝐫𝐩𝐨𝐬𝐞𝐬 𝐨𝐧𝐥𝐲 𝐚𝐧𝐝 𝐬𝐡𝐨𝐮𝐥𝐝 𝐧𝐨𝐭 𝐛𝐞 𝐜𝐨𝐧𝐬𝐭𝐫𝐮𝐞𝐝 𝐚𝐬 𝐢𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐚𝐝𝐯𝐢𝐜𝐞 𝐭𝐨 𝐦𝐞𝐞𝐭 𝐭𝐡𝐞 𝐬𝐩𝐞𝐜𝐢𝐟𝐢𝐜 𝐧𝐞𝐞𝐝𝐬 𝐨𝐟 𝐚𝐧𝐲 𝐢𝐧𝐝𝐢𝐯𝐢𝐝𝐮𝐚𝐥 𝐨𝐫 𝐬𝐢𝐭𝐮𝐚𝐭𝐢𝐨𝐧. 𝐏𝐚𝐬𝐭 𝐩𝐞𝐫𝐟𝐨𝐫𝐦𝐚𝐧𝐜𝐞 𝐢𝐬 𝐧𝐨 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞 𝐨𝐟 𝐟𝐮𝐭𝐮𝐫𝐞 𝐫𝐞𝐬𝐮𝐥𝐭𝐬.

𝐈𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐜𝐨𝐧𝐭𝐚𝐢𝐧𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭 𝐡𝐚𝐬 𝐛𝐞𝐞𝐧 𝐨𝐛𝐭𝐚𝐢𝐧𝐞𝐝 𝐟𝐫𝐨𝐦 𝐬𝐨𝐮𝐫𝐜𝐞𝐬 𝐛𝐞𝐥𝐢𝐞𝐯𝐞𝐝 𝐭𝐨 𝐛𝐞 𝐫𝐞𝐥𝐢𝐚𝐛𝐥𝐞, 𝐛𝐮𝐭 𝐢𝐬 𝐧𝐨𝐭 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞𝐝 𝐚𝐬 𝐭𝐨 𝐜𝐨𝐦𝐩𝐥𝐞𝐭𝐞𝐧𝐞𝐬𝐬 𝐨𝐫 𝐚𝐜𝐜𝐮𝐫𝐚𝐜𝐲."

A sober valuation analysis on $CDNS 🧘🏽‍♂️

•NTM P/E Ratio: 47.15x
•10-Year Mean: 29.04x

•NTM FCF Yield: 1.93%
•10-Year Mean: 4.53%

As you can see, $CDNS appears to be trading above fair value

Going forward, investors can receive ~38% less in earnings per share & ~57% less in free cash flow per share*** 🧠

Before we discuss valuation, let’s analyze why $CDNS is a high-quality business that should be on your radar

BALANCE SHEET✅
•Cash & Short-Term Inv: $916M
•Long-Term Debt: $648M

$CDNS balance sheet is strong. The company has a BBB+ S&P Credit Rating

RETURN ON CAPITAL✅
•2017: 19.4%
•2018: 23.5%
•2019: 19.6%
•2020: 22.0%
•2021: 24.2%
•2022: 29.5%
•LTM: 30.0%

RETURN ON EQUITY✅
•2017: 30.4%
•2018: 58.3%
•2019: 25.7%
•2020: 25.7%
•2021: 26.6%
•2022: 31.0%
•LTM: 30.0%

$CDNS return metrics are impressive, highlighting its financial efficiency

REVENUES✅
•2012: $1.33B
•2022: $3.56B
•CAGR: 10.34%

FREE CASH FLOW✅
•2012: $0.28B
•2022: $1.12B
•CAGR: 14.86%

NET INCOME🆗
•2012: $440M
•2022: $849M
•CAGR: 6.79%

SHARE BUYBACKS✅
•2013 Shares Outstanding: 294.56M
•LTM Shares Outstanding: 274.07M
•Share Reduction: ~7%

By reducing its shares outstanding ~7% in the last 10 years, $CDNS has increased its [...]

EPS by ~7.5% (assuming 0 growth)

MARGINS✅
•LTM Gross Margins: 89.2%
•LTM Operating Margins: 29.5%
•LTM Net Income Margins: 23.2%

As you can see, $CDNS is a quality business

***NOW TO VALUATION 🧠

As stated above, investors can receive ~38% less in EPS & ~57% less in FCF per share

Take a look at the first photo (P/E chart) & you’ll notice the severe multiple expansion in the last decade. $CDNS multiple more than doubled, increasing from ~18x in 2013 to ~47x today

In fact, $CDNS P/E chart almost mimics the stock price chart, implying that the stock price has run up way ahead of the fundamentals

So we must ask, is $CDNS worth a ~47 P/E?

Using Benjamin Graham’s 2G rule of thumb (not paying more than 2x the growth of a business) $CDNS would have to grow earnings at a 23.5% CAGR over the next several years to justify its valuation

This is substantially above historic growth levels AND future expectations of ~17%

While $CDNS is a great business & runs the design software space along with $SNPS (part of the semiconductor ecosystem), I would not want my returns to rely on the premium 47x multiple being maintained while growth likely won’t meet my 2G threshold

I’d take a closer look at $CDNS if it comes down to a 34x P/E, or at $180💵 per share based on today’s fundamentals

If it never gets there, so be it. As a disciplined quality-value investor, I don’t chase stocks that trade well above what I believe is fair value

With the stock up 52% YTD & the fundamentals being what they are, I believe the downside risk is much greater than the upside potential

#stocks #investing
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𝐃𝐈𝐒𝐂𝐋𝐎𝐒𝐔𝐑𝐄‼️: 𝐓𝐡𝐢𝐬 𝐢𝐬 𝐍𝐎𝐓 𝐈𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐀𝐝𝐯𝐢𝐜𝐞. 𝐁𝐚𝐛𝐲𝐥𝐨𝐧 𝐂𝐚𝐩𝐢𝐭𝐚𝐥® 𝐚𝐧𝐝 𝐢𝐭𝐬 𝐫𝐞𝐩𝐫𝐞𝐬𝐞𝐧𝐭𝐚𝐭𝐢𝐯𝐞𝐬 𝐦𝐚𝐲 𝐡𝐚𝐯𝐞 𝐩𝐨𝐬𝐢𝐭𝐢𝐨𝐧𝐬 𝐢𝐧 𝐭𝐡𝐞 𝐬𝐞𝐜𝐮𝐫𝐢𝐭𝐢𝐞𝐬 𝐝𝐢𝐬𝐜𝐮𝐬𝐬𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭.

𝐓𝐡𝐞 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐜𝐨𝐧𝐭𝐚𝐢𝐧𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭 𝐢𝐬 𝐢𝐧𝐭𝐞𝐧𝐝𝐞𝐝 𝐟𝐨𝐫 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧𝐚𝐥 𝐩𝐮𝐫𝐩𝐨𝐬𝐞𝐬 𝐨𝐧𝐥𝐲 𝐚𝐧𝐝 𝐬𝐡𝐨𝐮𝐥𝐝 𝐧𝐨𝐭 𝐛𝐞 𝐜𝐨𝐧𝐬𝐭𝐫𝐮𝐞𝐝 𝐚𝐬 𝐢𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐚𝐝𝐯𝐢𝐜𝐞 𝐭𝐨 𝐦𝐞𝐞𝐭 𝐭𝐡𝐞 𝐬𝐩𝐞𝐜𝐢𝐟𝐢𝐜 𝐧𝐞𝐞𝐝𝐬 𝐨𝐟 𝐚𝐧𝐲 𝐢𝐧𝐝𝐢𝐯𝐢𝐝𝐮𝐚𝐥 𝐨𝐫 𝐬𝐢𝐭𝐮𝐚𝐭𝐢𝐨𝐧. 𝐏𝐚𝐬𝐭 𝐩𝐞𝐫𝐟𝐨𝐫𝐦𝐚𝐧𝐜𝐞 𝐢𝐬 𝐧𝐨 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞 𝐨𝐟 𝐟𝐮𝐭𝐮𝐫𝐞 𝐫𝐞𝐬𝐮𝐥𝐭𝐬.

𝐈𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐜𝐨𝐧𝐭𝐚𝐢𝐧𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭 𝐡𝐚𝐬 𝐛𝐞𝐞𝐧 𝐨𝐛𝐭𝐚𝐢𝐧𝐞𝐝 𝐟𝐫𝐨𝐦 𝐬𝐨𝐮𝐫𝐜𝐞𝐬 𝐛𝐞𝐥𝐢𝐞𝐯𝐞𝐝 𝐭𝐨 𝐛𝐞 𝐫𝐞𝐥𝐢𝐚𝐛𝐥𝐞, 𝐛𝐮𝐭 𝐢𝐬 𝐧𝐨𝐭 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞𝐝 𝐚𝐬 𝐭𝐨 𝐜𝐨𝐦𝐩𝐥𝐞𝐭𝐞𝐧𝐞𝐬𝐬 𝐨𝐫 𝐚𝐜𝐜𝐮𝐫𝐚𝐜𝐲. "- Dimitry Nakhla | Babylon Capital®
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The Long Investor
I don’t know who needs to hear this but nobody should be making 52 buys or sells in a single year.
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The Long Investor
We made one decision last year that allowed us to beat the market by 56%

Instead of buying the $SPY which many should and I highly recommend for new investors, we decided to allocate up to 50% of our portfolio in $AMZN only instead.

Effectively buying $AMZN as our $SPY.

For two reasons:

Their fundamentals and technicals aligned to be undervalued:

-meaning margins were massively improving, from negative to positive in some cases, growth was continuing across all segments and

-the price was below its 200 Day MA and had declined perfectly down and held support on an oversold Fib level at the 0.78 Fib at $87

We then heavily bought, again at the end of Wave 2 and for a third time at $118 at the end of Wave 4 in October ‘23

We caught the bounces perfect.

There was no luck or gambling, this was low risk

You only need to make 2-3 decisions like this in one year and you can beat the market yourself.

But you will only have the confidence to do this when you understand what to look for and you keep all emotions under control.

Both can be learned.
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AkhenOsiris
All the megacaps are 7% (AMZN/MSFT) to 16% (AAPL) off their all-time highs heading into the prints, except GOOGL which is < 2% off ATH. A fairly wide distribution in behavior of late.
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Giuliano
Will learning the big ideas work?
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Brandon Beylo
Got tin and solar?

Joe did that!

Today, my Administration is investing $7 billion in a new program called Solar for All that will enable over 900,000 low-income households to have solar on their rooftops for the first time.

Solar for All will give folks more breathing room – and cleaner breathing room at that. - President Biden
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Hidden Value Gems
Quite a rare move for a UK company to buy its US peer.

➡️$87.5 offer price (21% premium to yesterday's close).

➡️Implies 10.8x fwd P/E.

➡️100% cash transaction

$JD.L $HIBB https://t.co/nvE6t1lHGU
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