Such an important concept seems to get forgotten in our modern euphoria. Thanks for the constant reminder to stay diligent about buying at fair value or better.
Hi Chuck, I love your videos and Fastgraph as an analyzing tool. You deserve a much higher “valuation” than 20400 subscribers. Your videos teach me patience. Thanks for your lessons.
This is a great lesson, and my favorite CC quote- it is so important he reiterates it. I had JNJ through that lost decade- I started it in a DRP, and it truly was a dead stock, floating near 60 for years. It had nothing but dividends. I almost sold it, and recall I was listening to Clark Howard on the radio on the drive from work. A caller asked him for a good stock, and he said 'well JNJ when it is below 60 might be a good LT buy'. So I kept buying below 60, and reinvested divs. Within a decade it >doubled! Buying a great co. with steadily increasing earnings and divs, below FV, matters!
I’ve been passively investing for many years until a few years ago I began taking a more active role. I’ve read several books and watched countless videos to learn as much as I can. When I started watching your Fast Graphs videos it all came together and made so much sense. I now have a much richer understanding of investing. Since then I have subscribed to a premium subscription to Fast Graphs and really enjoy the service. Thanks you Chuck for all your wisdom and knowledge in this up and down world of the stock market.
awesome, that you do exclusive videos for DK ! proud being a DK member! awesome video as always and a super important topic ! I thought about many 12 quality stocks that looked (past tense) attractive to me, I think about stocks like TROW or SEIC or AMGN .... they all might be good but I dont need a disaster in my portfolio, I rather put my money into 5 stocks, hyper concentrated and sleep well with stocks like ABBV or BMY... I can sleep so good with P/E FWD
Many great companies (like MSFT) but very few a buy at their current market prices. I have a quote from Charlie Munger where I can see it every day: “It’s waiting that helps you as an investor, and a lot of people just can’t stand to wait.
Thanks for this vid - and for all of them! I made a little experiment yesterday: I saw an enthusiastic SeekingAlpha article about "buy MSFT and hold forever", wrote a pretty balanced comment about ambitious valuation and mentioned (truthfully) that I wasn't unduly worried but had slightly trimmed my position. Immediately got several patronizing responses never to sell MSFT ever - not a word about valuation there... That does worry me indeed... euphoria warning lights go on...
My last comment lol. Wanna thank Chuck really for all of this.Have really learned much about stocks.I am a small Investor, but iam make good progress and on my way to my first 100k Euro Invested. With Chucks help iam sure i can build a decent depot for my Retierement in 30 Years. I
I wonder if we are heading for another "lost decade" with many stocks being overvalued. It might be interesting to see examples of companies that performed well during the original "lost decade". I wonder which companies did this.
Chuck is doing gods work 😅 I’m proud to be a small hand of investors that takes fundamentals/valuations seriously. I was for over a decade lost in the euphemism that Technical analysis mattered when it didn’t. I love the convenience of your webpage Chuck but what worries me is will this webpage be available forever since maintenance is a necessity ? I wish I could learn how to do the fast graphs by hand or excel so I could teach my family the way of fundamentals and no be so concerned with the webpage someday being put down.
a great comment from Buffett from one of his annual BKR meetings was (paraphrasing), "I tried using charts once (TA), but one day I discovered I was reading one upside down, and nothing changed (about the company.)'... hilarious Buffet logic!
I agree. If I thought MSFT was over valued at 145$, I couldn't have bought it. Now it is is 250$. Some companies are always Overvalued. Look at companies like SHW, MSFT, ODFL, SAIA,
basam nath: With all the respect, that is not true. None of the companies you mentioned are "always overvalued." they have been overvalued for the last few years that is the short-term. I can only say live and learn. Regards Chuck
LOL ... that is right!! ... they also don't ring a bell right before you go over a cliff that is so clearly coming. Pay a fair price for good company and you will have far less worry about what happens over the next 15 years. It can take 11 years for fundamentals to dominate. It can also take an afternoon.
I try to nowadays really only buy fair Company valuations. Like will buy more BAT,BMY,Discovery,Intel thats now on my list every day i looking hard to find long term good deals.Next weak i have another 5K Euro ready to invest.
Reese Purchase: Thanks, here is a link to answer your question,it is 1 of our most frequently asked: www.fastgraphs.com/documentation/blended-p-e/ regards, Chuck
Dear Chuck, I totally agree with you! Do you believe that these valuation metrics (like PEG or PE=15) also work on international stocks? Or would you prefer the “normal multiple” to evaluate stocks from other countries and continents? Since I heard the gossip, that there might be more international stocks included in the new version of FG, maybe you could release a video about this topic after the launch? Thanks for your work and all the insights!
If you get nothing else from this video...hear these words from Chuck..."you CAN over pay for the greatest company on the planet" ... if you don't understand why that is ABSOLUTE truth, you don't understand the VALUE of the great advice and the fast graphs tool. It is about buying at a price that maximizes your return (or income, or dividend growth, or profitability or whatever your objective) over time.
Piotr P :FAST Graphs are designed to illustrate or reveal valuation. So the answer is yes. however, our FREE-IUM (free trial) only allows you to look at a limited group of stocks,
Interesting. I'm not here to gloat - I'd really like to know how you think about Chuck's line of thought and if it might make you reconsider your decision to buy MSFT.
Simplywall.st claims, by their method of calculation, that MSFT is still undervalued. I'm not buying it! I've been comparing types of valuation and Fast seems like the best because it appears to _explain_ price behavior over time.
@@notroll1279 it's been the top position in my retirement account for years, but I want to own more of it. Any other stock I would reconsider, but as chuck said AAA rated, and I have quite a high conviction of them, at least as a tech stock they seem to be the safest and growing steadily, as well as their dividend. Their recent quarterly results also help. Am I being more emotional than rational?
Very interesting and true! Common sense lacks these days... What do you think about EBAY? It's difficult to evaluate since the pandemic boosted it and it's pretty cheap - but it isn't if they can't keep that boost going forward. I bought yesterday on the 11.50 % crash!
EBAY is a very interesting holding to look at with the FG tool. If you look at EBAY on the 20 year view, it looks very cheap, if you look at it with the 10 year view , it looks slightly over valued! That is because it was growing at a crazy rate 10 years ago but the rate of growth can't keep at those levels for ever and has slowed. So I personally would not want to pay for the growth rates of 10 years ago. So it is "basically" fairly valued, but not a great deal from a 10 year growth rate perspective.
You are making too much sense. Keep it up. People need to get back down to reality. If the math says it isn't real- then sooner or later the house of cards comes tumbling down. This time apparently it is later rather than sooner. Love your videos and your software.
Microsoft looks highly overvalued using P/E, (252 current vs 117 fair value). but Morningstar values the stock using discounted cash flow and is computing Fair Value of 278 vs a current price of 252, so 9% undervalued. Can you explain the pros/cons of using the Fastgraphs approach versus discounted cash flow when the two approaches give such different answers?
askwhy22: I also subscribe to MorningStar and here is their assessment of Microsoft fair value: "Our fair value estimate for Microsoft is $278 per share, which implies a fiscal 2021 enterprise value/sales (EV/S) multiple of 12 times, adjusted price/earnings, or P/E, multiple of 36 times, and a 3% free cash flow yield." I have several problems with that assessment. For starters the last time Microsoft traded at a P/E multiple of 36 was in June 2000 and that turned into dead money actually negative returns for the next decade. Additionally,MorningStar expects 12% revenue growth over the next 5 years which simply does not justify the current valuation or their projected valuation. Also their EV/S number would be extremely high relative to historical norms. So in my opinion, MorningStar is providing a momentum expectation and not a true discounted cash flow valuation. Which, by the way FAST Graphs are built on DCF methodologies and formulas. FAST Graphs do not offer an opinion of valuation as MorningStar is doing. Instead, we reveal valuation based on applying those fundamental formulas. Finally, MorningStar's definition of fair value is different than FAST Graphs which is focused on fundamentally driven intrinsic value. MorningStar only awards Microsoft a 3 star rating if you notice MorningStar's five-star price is $194.60 which would be close to what FAST Graphs we calculate for year end 2022 based on Microsoft's normal P/E ratio. In short, I believe MorningStar is making a momentum call whereas FAST Graphs is offering an intrinsic value calculation. Hope that helps, Chuck
@@FASTgraphs Thanks for the explanation. I know I'm a little slow in reading/replying but real life gets in the way sometime. I've been a FASTGRAPHS premium subscriber for some time now (several years I think) and frankly it's my primary tool for valuation. Prior to buying or selling I generally compare FASTGRAPHS to Morningstar, Zacks and several other sites to get different perspectives, so that's why I asked about the difference. Thank-you for taking the time to answer in such detail!
Prices are determined by supply and demand right? If investors love a stock, the price will be higher in the short run... Tesla is a perfect example of a stock everyone loves...
Anthony B: In the short run anything is possible. Think March 2020 with covert, 911 terrorist attacks etc. Nevertheless, markets always recover and bear markets have historically been much shorter than bull markets. Regards, Chuck
How about this example: In early 2016, MDLZ was about $42, but because 2015 earnings were highest ever, the P/E was only about 9. Irresistible, right? Next quarter, earnings dropped about 90% and stayed low for years. The price finally recovered in early 2019, but low earnings meant the P/E then was about 20. Now the price is about $60, so I no longer think that buying MDLZ was a mistake. But the original attractive P/E of 9 was the result of abnormally high earnings for one year only. That’s why knowing the multi-year P/E average is so important. I was lucky not smart.
Janis Skutelis: succinctly answer your question never. You are confusing market value with intrinsic value. When you are paying a P/E ratio above 15 you are accepting a yield off of the total earnings of the company that is below 6%. In my humble opinion that is reckless and always will be. It is not about the multiple the company deserves it is about what you and I deserve as investors. And as a been proven so many times before it is never different this time. One plus one always equals 2. Nevertheless, thanks for sharing your view. Chuck
Such an important concept seems to get forgotten in our modern euphoria. Thanks for the constant reminder to stay diligent about buying at fair value or better.
Chuck's videos are always here to bring me back to earth and make me a more prudent investor.
Valutation matters and it matters a lot. Guess I'll fall asleep with this echo of Chuck's wisdom tonight :D
It is now my mantra. :-D
Hi Chuck, I love your videos and Fastgraph as an analyzing tool. You deserve a much higher “valuation” than 20400 subscribers. Your videos teach me patience. Thanks for your lessons.
This is a great lesson, and my favorite CC quote- it is so important he reiterates it. I had JNJ through that lost decade- I started it in a DRP, and it truly was a dead stock, floating near 60 for years. It had nothing but dividends. I almost sold it, and recall I was listening to Clark Howard on the radio on the drive from work. A caller asked him for a good stock, and he said 'well JNJ when it is below 60 might be a good LT buy'. So I kept buying below 60, and reinvested divs. Within a decade it >doubled! Buying a great co. with steadily increasing earnings and divs, below FV, matters!
I admire your work too. Valuations get a little lost nowadays. Love your videos
Simply the best 👍👍 thanks for your work and the lessons I am able to take here at your channel 👍
Exactly best investment channel on RUclips by far
I’ve been passively investing for many years until a few years ago I began taking a more active role. I’ve read several books and watched countless videos to learn as much as I can. When I started watching your Fast Graphs videos it all came together and made so much sense. I now have a much richer understanding of investing. Since then I have subscribed to a premium subscription to Fast Graphs and really enjoy the service. Thanks you Chuck for all your wisdom and knowledge in this up and down world of the stock market.
Wayne Leafstone: Thank you, that means a lot to me and I'm humbled. Regards, Chuck
awesome, that you do exclusive videos for DK ! proud being a DK member! awesome video as always and a super important topic ! I thought about many 12 quality stocks that looked (past tense) attractive to me, I think about stocks like TROW or SEIC or AMGN .... they all might be good but I dont need a disaster in my portfolio, I rather put my money into 5 stocks, hyper concentrated and sleep well with stocks like ABBV or BMY... I can sleep so good with P/E FWD
What is DK?
@@maltlickytexas Dividend Kings
Enjoyed the video thanks for content chuck.
Great showing how to not get caugt up in a bubble
Many great companies (like MSFT) but very few a buy at their current market prices. I have a quote from Charlie Munger where I can see it every day: “It’s waiting that helps you as an investor, and a lot of people just can’t stand to wait.
Chuck is 100% correct!
Thanks for this vid - and for all of them!
I made a little experiment yesterday:
I saw an enthusiastic SeekingAlpha article about "buy MSFT and hold forever", wrote a pretty balanced comment about ambitious valuation and mentioned (truthfully) that I wasn't unduly worried but had slightly trimmed my position.
Immediately got several patronizing responses never to sell MSFT ever - not a word about valuation there...
That does worry me indeed... euphoria warning lights go on...
It certainly does!
Mr Valuation strikes again! Thank you, Chuck!
My last comment lol.
Wanna thank Chuck really for all of this.Have really learned much about stocks.I am a small Investor, but iam make good progress and on my way to my first 100k Euro Invested.
With Chucks help iam sure i can build a decent depot for my Retierement in 30 Years.
I
Great insights Chuck, thank you. Would love to hear your thoughts and analysis of FNF.
A video on valuations of big tech would be great Chuck. Thanks for the thoughtful analysis
I wonder if we are heading for another "lost decade" with many stocks being overvalued. It might be interesting to see examples of companies that performed well during the original "lost decade". I wonder which companies did this.
Great idea! I am wondering the same
And what their valuations were prior to that downturn.
Chuck is doing gods work 😅 I’m proud to be a small hand of investors that takes fundamentals/valuations seriously. I was for over a decade lost in the euphemism that Technical analysis mattered when it didn’t. I love the convenience of your webpage Chuck but what worries me is will this webpage be available forever since maintenance is a necessity ? I wish I could learn how to do the fast graphs by hand or excel so I could teach my family the way of fundamentals and no be so concerned with the webpage someday being put down.
a great comment from Buffett from one of his annual BKR meetings was (paraphrasing), "I tried using charts once (TA), but one day I discovered I was reading one upside down, and nothing changed (about the company.)'... hilarious Buffet logic!
how come you are not at the moneyshow? Your product is great.
I agree. If I thought MSFT was over valued at 145$, I couldn't have bought it. Now it is is 250$. Some companies are always Overvalued. Look at companies like SHW, MSFT, ODFL, SAIA,
basam nath: With all the respect, that is not true. None of the companies you mentioned are "always overvalued." they have been overvalued for the last few years that is the short-term. I can only say live and learn. Regards Chuck
Спасибо за полезный контент
"The problem is they don't ring a bell at the top of the market."
LOL ... that is right!! ... they also don't ring a bell right before you go over a cliff that is so clearly coming. Pay a fair price for good company and you will have far less worry about what happens over the next 15 years. It can take 11 years for fundamentals to dominate. It can also take an afternoon.
I try to nowadays really only buy fair Company valuations.
Like will buy more BAT,BMY,Discovery,Intel thats now on my list every day i looking hard to find long term good deals.Next weak i have another 5K Euro ready to invest.
Great video Chuck. How are the weights assigned in the blended P/E calculation? Thanks
Reese Purchase: Thanks, here is a link to answer your question,it is 1 of our most frequently asked: www.fastgraphs.com/documentation/blended-p-e/ regards, Chuck
@@FASTgraphs Thanks Chuck!
Thanks for the nightmares Chuck!!!
Dear Chuck, I totally agree with you!
Do you believe that these valuation metrics (like PEG or PE=15) also work on international stocks? Or would you prefer the “normal multiple” to evaluate stocks from other countries and continents?
Since I heard the gossip, that there might be more international stocks included in the new version of FG, maybe you could release a video about this topic after the launch?
Thanks for your work and all the insights!
I‘d love to see more international stocks on FG
Me 2
I'm voting for international stocks on FG too.
If you get nothing else from this video...hear these words from Chuck..."you CAN over pay for the greatest company on the planet" ... if you don't understand why that is ABSOLUTE truth, you don't understand the VALUE of the great advice and the fast graphs tool. It is about buying at a price that maximizes your return (or income, or dividend growth, or profitability or whatever your objective) over time.
does a sector drive the market
Is there a feature in FastGraphs that allows me to find undervalued stocks? Is it available in free trial?
Piotr P :FAST Graphs are designed to illustrate or reveal valuation. So the answer is yes. however, our FREE-IUM (free trial) only allows you to look at a limited group of stocks,
MSFT and AAPL falling and struggling to recover after outstanding earnings reports is surely a measure of being severely overvalued.
Me watching this after I opened a position in MSFT today.
Interesting.
I'm not here to gloat - I'd really like to know how you think about Chuck's line of thought and if it might make you reconsider your decision to buy MSFT.
Simplywall.st claims, by their method of calculation, that MSFT is still undervalued. I'm not buying it!
I've been comparing types of valuation and Fast seems like the best because it appears to _explain_ price behavior over time.
@@notroll1279 it's been the top position in my retirement account for years, but I want to own more of it. Any other stock I would reconsider, but as chuck said AAA rated, and I have quite a high conviction of them, at least as a tech stock they seem to be the safest and growing steadily, as well as their dividend. Their recent quarterly results also help. Am I being more emotional than rational?
@@TuckermanLane Yahoo finance say the same. Agree FAST is incredible.
@@Moham153 It's a bit contradictory... in your first post you said you opened a position today...
Very interesting and true! Common sense lacks these days...
What do you think about EBAY? It's difficult to evaluate since the pandemic boosted it and it's pretty cheap - but it isn't if they can't keep that boost going forward. I bought yesterday on the 11.50 % crash!
EBAY is a very interesting holding to look at with the FG tool. If you look at EBAY on the 20 year view, it looks very cheap, if you look at it with the 10 year view , it looks slightly over valued! That is because it was growing at a crazy rate 10 years ago but the rate of growth can't keep at those levels for ever and has slowed. So I personally would not want to pay for the growth rates of 10 years ago. So it is "basically" fairly valued, but not a great deal from a 10 year growth rate perspective.
@@douglasheun9507 Thank you.
👏🏻👏🏻👏🏻👏🏻
You are making too much sense. Keep it up. People need to get back down to reality. If the math says it isn't real- then sooner or later the house of cards comes tumbling down. This time apparently it is later rather than sooner. Love your videos and your software.
Microsoft looks highly overvalued using P/E, (252 current vs 117 fair value). but Morningstar values the stock using discounted cash flow and is computing Fair Value of 278 vs a current price of 252, so 9% undervalued. Can you explain the pros/cons of using the Fastgraphs approach versus discounted cash flow when the two approaches give such different answers?
askwhy22: I also subscribe to MorningStar and here is their assessment of Microsoft fair value: "Our fair value estimate for Microsoft is $278 per share, which implies a fiscal 2021 enterprise value/sales (EV/S) multiple of 12 times, adjusted price/earnings, or P/E, multiple of 36 times, and a 3% free cash flow yield."
I have several problems with that assessment. For starters the last time Microsoft traded at a P/E multiple of 36 was in June 2000 and that turned into dead money actually negative returns for the next decade.
Additionally,MorningStar expects 12% revenue growth over the next 5 years which simply does not justify the current valuation or their projected valuation. Also their EV/S number would be extremely high relative to historical norms. So in my opinion, MorningStar is providing a momentum expectation and not a true discounted cash flow valuation. Which, by the way FAST Graphs are built on DCF methodologies and formulas. FAST Graphs do not offer an opinion of valuation as MorningStar is doing. Instead, we reveal valuation based on applying those fundamental formulas.
Finally, MorningStar's definition of fair value is different than FAST Graphs which is focused on fundamentally driven intrinsic value. MorningStar only awards Microsoft a 3 star rating if you notice MorningStar's five-star price is $194.60 which would be close to what FAST Graphs we calculate for year end 2022 based on Microsoft's normal P/E ratio. In short, I believe MorningStar is making a momentum call whereas FAST Graphs is offering an intrinsic value calculation.
Hope that helps, Chuck
@@FASTgraphs Thanks for the explanation. I know I'm a little slow in reading/replying but real life gets in the way sometime. I've been a FASTGRAPHS premium subscriber for some time now (several years I think) and frankly it's my primary tool for valuation. Prior to buying or selling I generally compare FASTGRAPHS to Morningstar, Zacks and several other sites to get different perspectives, so that's why I asked about the difference. Thank-you for taking the time to answer in such detail!
chris from plant city
Prices are determined by supply and demand right? If investors love a stock, the price will be higher in the short run... Tesla is a perfect example of a stock everyone loves...
Is a huge market crash still possible these days? Like a dip 80% or more or even a long term bear market with loss returns over the years
Anthony B: In the short run anything is possible. Think March 2020 with covert, 911 terrorist attacks etc. Nevertheless, markets always recover and bear markets have historically been much shorter than bull markets. Regards, Chuck
Is it hard to find stocks under the orange 🍊 line
Chewie 13: I agree that it's harder today, but they are there. I give 10 examples in my next video. Regards, Chuck
How about this example: In early 2016, MDLZ was about $42, but because 2015 earnings were highest ever, the P/E was only about 9. Irresistible, right? Next quarter, earnings dropped about 90% and stayed low for years. The price finally recovered in early 2019, but low earnings meant the P/E then was about 20. Now the price is about $60, so I no longer think that buying MDLZ was a mistake. But the original attractive P/E of 9 was the result of abnormally high earnings for one year only. That’s why knowing the multi-year P/E average is so important. I was lucky not smart.
Chuckster .
VALUATIONS? What's that?😆
Does valuation matter a lot? Just asking... ;-)
Just when you will understand that P/E of 15 is old history? We are not in jurassic world anymore with the money amount and everybody investing now!
Janis Skutelis: succinctly answer your question never. You are confusing market value with intrinsic value. When you are paying a P/E ratio above 15 you are accepting a yield off of the total earnings of the company that is below 6%. In my humble opinion that is reckless and always will be. It is not about the multiple the company deserves it is about what you and I deserve as investors. And as a been proven so many times before it is never different this time. One plus one always equals 2. Nevertheless, thanks for sharing your view. Chuck
"It's different this time"
This time IS DIFFERENT!!!😅🤣😂 VALUATIONS don't Matter because....blah blah blah.....OK Millenial
Ok Millenial
- said the dutch man and bought the tulip 😅