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This had a spectacular growth spurt, and since that time the growth has pretty much levelled out for a long time. Now it just kind of trades in a nice trading range. As time has gone on, the market has become less and less interested, as Prem Watsa has not been able to deliver the returns of the glory days. The stock price and Fair Market Value, as he measures it, are exactly the same. He is concerned that there may be a further set back.
Had a fairly large set back from the last year or so, and is kind of consolidating at about 2X BV. It has nice upside potential of 51%. The downside risk is to about $74, and that is where he would love to be a buyer. It has fairly easy upside to about $92. He wouldn’t worry about this one in the slightest.
A very expensive stock. On a Price to Book basis, it is out of sight. On a Price to Earnings ratio, it is nothing to write home about. However, this is a momentum stock which keeps on working and keeps on producing nice numbers, because it is a stock for the times. It will keep on going until it doesn’t. When it doesn’t, you had better not be there, because the downside risk is really something.
(A Top Pick Aug 11/16. Up 7.07%.) This is just sort of soldiering a long. It hasn’t quite got enough FMV to really propel it forward, but has enough that it is still keeping it up there. In the meantime it has a decent yield. The kind of thing you can tuck away in your portfolio and not worry about it.
The company never was able to deliver on the promise that John Chen brought. If they can translate those 60 million dashboards to another 60 million self driving cars, that would be wonderful. However, there isn’t anybody out there who is taking them on. This is not an investment, it is a speculation.
If you like to roll the dice, then buy some of this and cross your fingers. A story that has had at least 3 huge cycles since he has been following it. When it gets to the top, it has one of those moments when the market quits and the stock falls. His FMV is 66% lower than the current price. Typically, when these stocks correct, they not only correct back to their FMV, but below it.
A problem with buying this is that it has had an enormous run from its bottom. It was trading at a big discount to its BV, and is now trading at about 4.5X BV, an astonishing run. This is a cyclical stock, long term. It is trading at about its Fair Market Value. It isn’t cheap anymore.
A conundrum. Cheap on a PE basis, Price to Book, and even on a quality to balance sheet basis. However, what is the outlook for auto sales? He hears it is fairly bleak. Car lots are rapidly filling up with inventory, including used cars. This is different than General Motors (GM-N) which is going gangbusters in China. If you own these, you might have to wait for another auto cycle.
Market. There is a lot of liquidity sloshing around the market, which really doesn’t know what to do. However, when you try to reach into the market to grab some value, it’s difficult. Because of this, what has happened increasingly lately is that as a kind of default investment, investors are going into ETF’s, somewhat blindly. The issue he has is that people buy and never mind what the quality, the underlying fundamentals are. When he sees the market doing the same thing again, he has to look back and remember what happened when this happened before. In the end, it wasn’t terribly pretty. It is very hard to fight it. There is still value to be found in certain segments. The financial sector is an obvious standout on both sides of the border as being cheap. When this market stops, you better get off.