Do the fundamentals matter anymore?

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dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Do the fundamentals matter anymore?

Post by dan_s »

There is lots of money invested today in what I call "Story Stocks", whose business models can't possibly justify the current share price / market-cap. Read the following:

"Joby Aviation, which plans to begin an electric air taxi service in 2024, is worth more than Lufthansa, EasyJet or JetBlue. Does that seem right? In this market, why not? Heck, earlier this year, Tesla was worth more than the next nine car manufacturers combined, though now only the next six. Beyond Meat, made with pea protein, is worth more than the entire market for peas eaten globally—like the bumper sticker says: Imagine whirled peas. Do fundamentals even matter? I can go on. Used-car sales platform Carvana is worth more than Volvo, Honda, Ford or Hyundai. Airbnb is worth more than Marriott and Hilton combined. Crypto-exchange Coinbase is worth more than the Nasdaq. I live at the intersection of innovation and disruption, but when companies are worth more than any possible reality, watch out." -Andy Kessler, The Stock Market Fails A Breathalyzer

The current stock prices of most of our Sweet 16 and Small-Cap growth portfolio companies cannot be justified unless I assume oil is going back below $50/bbl or lower and natural gas is going back to $2.50/MMBtu or lower. This is why many of my favorite upstream companies are using free cash flow to fund large stock buybacks (See FANG), pay down debt and start variable dividend programs.

The Wall Street Gang believes that demand for oil and gas is going away. If you watched our webinar on Sept 17th you know that demand for oil won't be impacted by wind and solar and demand for natural will go up. See Slide 30, which is based on a new study by the National Renewable Energy Laboratory (NREL) Electrification Futures Study (2021), which is a pro-renewable firm.
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Re: Do the fundamentals matter anymore?

Post by dan_s »

Re: Inflation

"Sometimes I think I’m taking crazy pills. In my real life, everywhere I look I see less choice and higher prices. Everybody I talk to has a story about something they need to buy but can’t. Many big-ticket items have unprecedented lead times, assuming you can get them at all. My friends in the corporate world are focused on raising prices ahead of their increasing input costs. They are also staying up at night worried about accessing supply altogether – be it parts, materials, or even labor. I see shrinkflation, both in the size of the consumer goods I buy and in the level of service provided, compared to the pre-Covid period. And yet, in my online life it is a decidedly different story. Many brilliant people I respect and follow on various social media platforms tell me I’m nuts. The economy is a deflationary machine, they say. Capitalism will solve these temporary supply chain issues, they say. The velocity of money is falling, they say. Shut up and take those pills you paranoid chicken, I hear." -Doomberg, We Are Running Out Of Some Stuff
Dan Steffens
Energy Prospectus Group
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