Lockstep Investing

02/08/2024

10/07/2024

“If you don’t find a way to make money while you drink Mojitos, you will work until you die” - Paul Buffett

09/07/2024

Alibaba Continues to Buy Back Shares!

Alibaba (BABA) bought back $5.8 billion worth of its own shares in Q2 at an average price of $75.32 per share!

For over 2 years, Alibaba has been on a share-buying spree, snapping up the equivalent of 325 million ADR shares at an average price of $78.77 per share - https://buff.ly/3LgUKVH

What does this mean for investors?

Thanks to these buybacks, your earnings per share (EPS) have increased by over 10% (assuming static profits). And with $26.1 billion left in their buyback program, you could see another 14% boost to your EPS!

Investment Lesson: Share buybacks can significantly increase your share of profits, even if the company’s earnings don’t grow.

WHY?

➡ Fewer Shares Outstanding: Buybacks reduce the number of shares in the market, boosting EPS.

➡ Returns Value to Shareholders: Similar to a dividend, buybacks return value to shareholders but is more tax-efficient as there is no withholding tax as with dividends.

➡ Shows Confidence from Management: Buybacks suggest that management believes the stock is undervalued and is using the company’s capital to take advantage of bargain prices.

BUT Beware ⚠

This tactic can be abused if management uses buybacks as window dressing by purchasing shares when the company is overvalued to make themselves look good.

Another downside is that it indicates that management has no better uses for capital.

In Alibaba’s case - CAPEX is low relative to cash generated from operations, so I see them buying back shares when the share price is depressed as a positive move.

What are your thoughts on Alibaba’s strategy? 🤔 Drop your comments below! 👇



Disclaimer: This post is for informational and entertainment purposes only and does not constitute investment advice. Always conduct your own research and consult with a financial advisor before making any investment decisions.

08/07/2024

Cause for Concern? 🤔

The S&P 500 and the Nasdaq have been on fire lately, up over 16% and 21% respectively year-to-date! But let’s dive a bit deeper:

From previous discussions, we know value is far more important than price.
With this in mind, the S&P is currently valued at around 29x earnings (depending on the data source).

With the 50-year median P/E at 20.5, it is clear that the market is overvalued, but it doesn’t appear to be in bubble territory.

With Q2 2024 earnings season approaching, there’s huge pressure on these companies.

Will earnings beat expectations or is the market headed for a reality check?

Share your thoughts! 👇



Disclaimer: This post is for informational and entertainment purposes only and does not constitute investment advice. Always conduct your own research and consult a financial advisor before making any investment decisions.

28/06/2024

Feedback like Dan's reminds me why I started this journey: to help you become a more confident and informed investor, regardless of your experience.

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Thank you!

27/06/2024

Amazon just became the 5th listed US company to cross the $2 trillion market cap milestone!

There’s no denying that Amazon (AMZN) is a fantastic business. But let’s not forget about Alibaba (BABA), another high-quality company worth considering.

When you compare the two side by side:

• AMZN’s revenue is 3.5x BABA’s
• AMZN’s EBIT (Earnings Before Interest and Taxes) is 1.6x BABA’s
• AMZN’s FCF (Free Cash Flow) is only 1.4x BABA’s

Yet, AMZN’s Enterprise Value (Market Cap + Net Debt) is an incredible 13.2x BABA’s.

This discrepancy can mean only one of three things:

1. AMZN is overvalued
2. BABA is undervalued
3. Neither company is trading at its intrinsic value

What’s your take on this?



For Extra Credit: Comparing EBIT and FCF to Enterprise Value helps us understand how the market values each company’s profitability and cash generation. A higher Enterprise Value relative to EBIT or FCF could imply overvaluation, while a lower ratio could imply undervaluation.

Disclaimer: This post is for informational purposes only and is not financial advice. Please do your own research and consult with a financial advisor before making any investment decisions.

21/06/2024

Is the US in the Middle of a Housing Crisis?

According to Zillow, there is currently a 4.5 million housing shortage in the US. You can read more about it here: https://www.zillow.com/research/affordability-housing-shortage-34153/

Adding to the issue, mortgage rates are the highest they've been since 2002. You can check the latest data here: https://fred.stlouisfed.org/series/MORTGAGE30US

Moreover, the median household income has not kept up with the rising US housing prices, exacerbating affordability issues for many Americans.

Is this indicative of a housing crisis?

Let's discuss!

20/06/2024

🎶 Music to an investor’s ears! 🎶
Biotech company Illumina (ILMN) is divesting its cancer-testing subsidiary, Grail. 💊🧬
As part of the S&P 500, Grail will be too small for the index after the spin-off, forcing index-tracking funds to sell! 📉
This sale is all about fund mandates, NOT Grail’s fundamentals. 💡
It could be a fantastic opportunity for individual investors and highlights one HUGE advantage we have over institutions!
I’m doing more research on this!
Who’s interested in Grail shares?
Disclaimer: This post is for informational purposes only. Please do your own research before making any investment decisions.

📸: FT article https://www.ft.com/content/3603bef0-0c75-4744-bd83-4602b96c9762