Do the fundamentals matter anymore?
Posted: Sat Sep 18, 2021 10:00 am
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.
"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.