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by prewett
1313 days ago
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9 is the recent low, but presumably GP would consider 10 to be a good deal, too. Typically companies with a solid future making a reasonable profit are about 20 - 30; historically META is about in this range. If META still has "normal" prospects, then it is pretty undervalued. However, this is not a Buffett view on things, as he evaluates based on intrinsic value rather than P/E. He also avoids tech companies because it's hard to figure out what their intrinsic value is. KO (Coca-Cola) for example, is going to grow about as much as GDP, it has a long history of 30% net profit, it has a huge moat so the dynamics of the company aren't likely to change. Thus one can actually attempt to evaluate its intrinsic value: what would you pay for a bond that earned 30% every year? Do the present value calculation and there you go. But what is META's prospects 10, 20, 30 years from now? Hard to say, and the social media landscape keeps changing. So Buffett would not invest in META--a P/E of 9 might be a steal, but it might also be an indication that the prospects of the company are no longer so positive as they were two years ago. (AAPL is a notable exception to Buffett not investing in tech, because of how their products reinforce each other to create a large moat. At this point I think it is also fairly likely that Apple will be around making computers for the foreseeable future--even OS 9 didn't kill them off, and now they have market leading hardware and a solid OS and compelling ecosystem. In this way of thinking, one could argue they have similar dynamics as KO, but with the advantage that they have growth prospects. They also are returning 30% to shareholders, mostly in the form of huge stock buybacks. Hence Buffett has been a massive buyer of AAPL recently.) |
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This is the key point right here.
Just looking at stats alone isn't enough to know that you're seeing "an incredible opportunity".