Absolutely – Ozarks, Maid, The Crown
all brilliant
Well, you can’t be happy by the 21% fall in the share price after results?
Doesn’t bother me – don’t own it
But you said you love it?
Well as I’ve said before,
I love my mattress, but it doesn’t mean I buy a bedding company
You know the rule – “Real Returns”
Or as Jerry McGuire put it when he yelled down the phone
“SHOW ME THE MONEYYY !”
Have you heard about their new series, just released?
“Overpayn” or is it “Overpain”?
About investors who Overpay
Then HODL – Hold On for Dear Life
And suffer pain or is it “payn”?
They get “HODLLED”
No, sounds like psychological horror
not my genre
unless Nicole Kidman or Margaret Qualley are the leads
Maybe they read that Fund manager investor letter saying that you could’ve paid a “Justified P/E” ratio of
281 for L’Oreal,
241 for Altria or
230 for Lindt
in 1973
and still received a 7% return p/a for 46 years
Oh, I know the guy
A superstar, lives on an island, runs a £26bn fund
Which he only started in 2010.
I launched in 2008 but only have $90m
so he wins (so far)
But hey, I also live on an island – albeit slightly muddier
He’s a clever guy, so I’m not doubting his maths
But 2 points:
1. You must know the business will survive for 46 years & how do you know that?
L’Oreal wasn’t the only cosmetics company in 1973. Many others failed, I’m sure.
Ditto for chocolatiers.
If you backed the wrong horse, you weren’t so lucky and don’t most horses look fit in the parade ring?
2. A higher PE is easier to justify for smaller companies that can grow
I only have price data from 1979 when L’Oreal was €0.595 per share
multiplied by 633m shares in issue
= €377m market cap
Easier to compound a €377m company than a € 212bn one
isn’t it?
especially in a changing world with Kim K & her TikTok mates launching beauty brands daily
Still, at least we islanders are aligned on:
Checkpoint – both like
Chinese stocks – don’t like (ok, I hate)
So can we pay any price for Netflix?
Revenue & Operating income are up
Reed Hastings is a genius
But can it, “Show me the money”?
Last year, we all stayed home watching tv – subscribers & revenue soared
Actors couldn’t social distance, meaning lower content costs
Revenue was $30bn
and operating margin an all-time high of 18%
in perfect conditions
222m subs, up 9%
Now let’s stargaze for 3 years
Revenue guidance for Q1 only +10% – competition increasingly problematic
But let’s pretend $45bn of revenue in 2024
14% CAGR
at peak margins?
maybe competition offsets leverage?
Seems aggressive, but ok
Lop off $1bn for interest – cash flow is still negative
Tax 12% ?
seems low, but ok
= net income $5.7bn
So what’s the exit PE?
More mature in 3 yrs so expect some de-rating
Say 20x earnings?
Ok, market cap = $114bn
Now?
$177bn today
-36% !
Oh
using optimistic assumptions?
Jerry McGuire would not be happy
No wonder there’s “payn” about