Jeremy Grantham says stocks could be heading for a ‘melt-up'

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#21
Next you are going to tell me Tesla valuation makes sense! (after earnings catches up with valuation)  Smile

(vested in both Tesla and Shopify at negative PEs)
“If you buy a business just because it’s undervalued, then you have to worry about selling it when it reaches its intrinsic value. That’s hard. But if you can buy a few great companies, then you can sit on your ass. That’s a good thing.” - Charlie Munger
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#22
Yea. Operating leverage is a concept that I'm still trying to grasp. Tesla may be one for me to learn where it is now selling for 355x P/E. To me, earnings have to grow by 20 times more for it to be fully valued as an automaker.

Apple was another stock that intrigued me. I thought at USD $50 it has reached its full value at about the 18 P/E and revenue could not grow further. However Tim Cooks proved otherwise. Earnings have grown 60% while revenue has grown only at 30%. Buying it then, I would be owning a company that is 10 x P/E.
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#23
Agreed. I sold way too early at $42.5 (adjusted for splits).

I think Apple is sandbagging growth rates. People talk about Amazon deliberately sacrificing short term profits for long term growth. I think Apple is deliberately sacrificing short term growth for long terms profit.

What I meant by that is, I think Apple could grow every year at 20-30% if they focus on growing revenues. But that would entails cheapening their brand, and sacrifice the long term margins they can charge. 

Instead, they are very deliberate and selective at every sector they choose to operate in. When they enter a new sector, they make sure they dominate it, in that they can charge a high margin, and get the largest profit share (in contrast to market share). Quite the antithesis to Amazon's philosophy (get as much market share as possible first, then figure out how to expand margins later).
“If you buy a business just because it’s undervalued, then you have to worry about selling it when it reaches its intrinsic value. That’s hard. But if you can buy a few great companies, then you can sit on your ass. That’s a good thing.” - Charlie Munger
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#24
https://seekingalpha.com/article/4471988...021-update

Tracking Jeremy Grantham's GMO Capital Portfolio - Q3 2021 Update
Quote:*Jeremy Grantham’s 13F portfolio value increased from $20.05B to $20.22B this quarter.
*GMO Capital increased Cigna and Constellation Brands while reducing Accenture plc, American Express, Alibaba Group Holding, and Baidu.
*The largest three individual stock positions are Microsoft Corporation, Alphabet, and Apple, and they add up to ~12% of the portfolio.

Isn't it weird that, he thinks the US market is in an epic bubble worst than the Great Depression, yet his fund's 3 largest holdings are... FAAMNNG stocks?
“If you buy a business just because it’s undervalued, then you have to worry about selling it when it reaches its intrinsic value. That’s hard. But if you can buy a few great companies, then you can sit on your ass. That’s a good thing.” - Charlie Munger
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#25
(08-12-2021, 01:16 AM)Wildreamz Wrote: https://seekingalpha.com/article/4471988...021-update

Tracking Jeremy Grantham's GMO Capital Portfolio - Q3 2021 Update
Quote:*Jeremy Grantham’s 13F portfolio value increased from $20.05B to $20.22B this quarter.
*GMO Capital increased Cigna and Constellation Brands while reducing Accenture plc, American Express, Alibaba Group Holding, and Baidu.
*The largest three individual stock positions are Microsoft Corporation, Alphabet, and Apple, and they add up to ~12% of the portfolio.

Isn't it weird that, he thinks the US market is in an epic bubble worst than the Great Depression, yet his fund's 3 largest holdings are... FAAMNNG stocks?

Don't read too much into 13F filings for a large fund family like GMO.

Firstly, the filings aggregate all the long positions across all GMO's funds, and some of these funds are long-only with a US mandate. So naturally, these funds can only buy US positions, and aggregating them with other funds dilute the overall picture.

Secondly, the filings do not contain information on short positions, and GMO do have long-short funds.

The better way to see whether they are doing what they say is to look at their flagship fund, the benchmark-free allocation fund. They can go long/short and in any country with this fund. And since they are benchmark agnostic here, they have less tendency to hug the index.

https://www.gmo.com/globalassets/documen...n-strategy

You can see that in their long book, US exposure comprised 6.6%. In the short book, US comprised 46%. They are heavy in EM/Japan, and light in US, just like what they've been saying since years ago.

So casting aside whether they made a mistake with their EM call years back (as of now, they are still wrong on that), at least they are doing what they say, unlike many other fund managers.
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#26
I see. Very interesting indeed. Most of us just know about his public positions on the state of the market. Yet it only represents a relatively small amount of AUM. His overall fund profile is actually quite similar to other funds with heavy FAAMNNG weightage.

The more you know. Smile  

Also I think it's rather unusual to benchmark against CPI, another very interesting choice.
“If you buy a business just because it’s undervalued, then you have to worry about selling it when it reaches its intrinsic value. That’s hard. But if you can buy a few great companies, then you can sit on your ass. That’s a good thing.” - Charlie Munger
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#27
Would be tough to beat CPI plus 5% this year Big Grin

Personally I think beginning of year 12 months treasury plus 3% is reasonable figure to beat. Absolute return funds should not be beta funds.

A 3% alpha is respectable but not sexy if you do a long/short. So to sell it has to be juiced up.

(08-12-2021, 09:30 AM)Wildreamz Wrote: I see. Very interesting indeed. Most of us just know about his public positions on the state of the market. Yet it only represents a relatively small amount of AUM. His overall fund profile is actually quite similar to other funds with heavy FAAMNNG weightage.

The more you know. Smile  

Also I think it's rather unusual to benchmark against CPI, another very interesting choice.
Before you speak, listen. Before you write, think. Before you spend, earn. Before you invest, investigate. Before you criticize, wait. Before you pray, forgive. Before you quit, try. Before you retire, save. Before you die, give. –William A. Ward

Think Asset-Business-Structure (ABS)
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#28
Yes if you look at Corgitator's post, he did not beat CPI year: https://www.gmo.com/globalassets/documen...n-strategy
“If you buy a business just because it’s undervalued, then you have to worry about selling it when it reaches its intrinsic value. That’s hard. But if you can buy a few great companies, then you can sit on your ass. That’s a good thing.” - Charlie Munger
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