Philip Morris $PM share price up ~7% since the post above 2 weeks ago

"Security Analysis" opened with Horace's line "many shall be restored that now are fallen, and many shall fall that now are in honor" for a reason

This column appears quite poorly researched

fred.stlouisfed.org/series/BOGZ1...

www.federalreserve.gov/econresdata/...

PS. The hosuehold % cited by the "strategist" is likely wrong

Fed data shows all equities - both direct stocks and indirectly in funds - as 45% of financial assets (25Q2)

Stocks as % of wealth (which include non-financial assets, notably homes) is likely to be an even lower

More charts:

AI investments as % of US GDP
Past S&P 500 returns (1985: +31%, 1986: +18%)

Tech investment being 6% of US GDP - it's unclear where this number came from; Bloomberg says 4.4%

Note the "strategist" has switched from talking about AI bubble to tech investment because the AI investment much less, only ~1% of GDP

The 2000 peak was a signal; 1984 one wasn't

On macro level, it is true % of US household wealth in equities (both direct and indirect) is at record high and previous highs were followed by market corrections

However, the US % has always been higher than those in EU/UK/Japan, so that it is again today is not a signal

Many of the arguments just show the "strategist" doesn't analyse (or even follow) individual companies

Net Debt doesn't mean low cash generation, because companies use debt (plus buybacks) to enhance ROE

$GOOG started paying dividends in 2024
$MSFT Net Debt fell during FY25

"It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages."
- Adam Smith

PSA: If a business has a 5.5% EBIT* Margin, it makes $5.5 of profit on every $100 of goods sold

If they cut their prices by just 5.5%:

In theory, they stop making a profit

In practice, they make a loss, since margin on goods sold is lower than 5.5% once you exclude supplier payments

* op. income

Depending on brand, this year, 2023, or some other recent year.

Context

PS. I am not a fan of endlessly tracking changes in expectations (it's linked to the "anchoring" fallacy that assumes past valuations as fair)

But Rightmove $RMV didn't just hike investments on 7-Dec; they also acknowledged Strategic Growth Areas weren't growing as fast as hoped

$RMV shares actually down another 8% since market close after profit warning (7-Dec)

So we are currently wrong, though the extra shares we bought that day show a profit because we bought in teh first 5 minutes when shares were down 25%+

"Simple but not easy"

open.substack.com/pub/libraria...

Rightmove's $RMV value fell by ~£625m (12.5%) on a £20m hike in investments (incl. CapEx) on 7-Dec

I didn't agree with the reaction, but the cumulative impact of EBIT now expected to grow at 3-10% in 2026-28 (starting at low end and, rising over time) vs. 10%+ previously guided is about 15% by 2028

Rightmove currently blocks ChatGPT

CEO addressed this on 7-Nov profit warning call by discussing $RMV's advantages in current share, organic traffic generation, etc.

"We talk to them regularly, they're obviously not ready with their European setup ... But we expect that to come"

Telegraph take on the Paramount bid for WBD is one of the few times I agree with them*:

"America for sale as Gulf autocrats mount a Trumpist raid on Hollywood"

Telegraph newsroom has fought off a similar bid by UAE money fronted by RedBird

* They are after more than acceptance