The Market 2022-2023-2024

[Folster]

TROW analysis temporarily removed.

I was double checking my numbers and was getting some wildly different Free Cash Flow numbers from other sites. I've never had problems with Market Watch in the past.

 

[dscher]

Looks like I'm going to open a new position in TROW this week. It's been on my watchlist for a while and it has recently fallen 29% and is near its 52 week low.

Pristine financial statements.

- Revenue growth of nearly 9% a year over the last 5 years, consistently increasing every year. Analysts expect revenue growth of over 12% a year for the next 5 years. Net income and Free Cash Flow are extremely consistent and increasing every year.

- Net profit margins of 37-40%

- ROIC over 30%

- no debt.

- dividend of 2.71%. 35 consecutive years of raising dividends. Dividend is safe and is only 36% of Net Income and 37% of Free cash flows.

I was conservative with my revenue projections using the average of the last 5 years 8.9% vs the 12%+ that analysts expect over the next 5 years.

Even with the conservative projections I calculated a stock price of $211.33 or $226.75 when you factor in net cash they are holding. The current price is $159. This means you could purchase at $211 and should expect a return of 10% a year if everything goes right. At $159 you are getting a large 32-42% discount/margin of safety and it implies an annual return of about 13% a year.

What are the headwinds for TROW? The growth of passive investing from the likes of Vanguard and iShares is a threat. TROW is largely an active manager which is out of favor, but they are on the lower end when it comes to fees with expenses compared to active managers. They stay away from bloated advisory class shares with large front end loads and their annual expenses are reasonable. In my opinion, they are one of the better performing fund families. I liked them a lot before I got into ETFs. They also recently launched ETF versions of some of their popular funds.

It's also fair to point out the last 5 years of performance I analyzed is from a bull market. How will they fair in a bear market?

It seems their recent price drop is due to a 2.4% decrease in Assets Under Management (AUM) for November, disclosed in November. They had been steadily increasing AUM prior of course as the market has been going up.

Is now the best time to buy? Who knows. It may keep going down, but I think they will be a solid addition to my portfolio. I'll likely open a small position and look to add if it keeps falling.

Might be heading to 120ish area..

Just a TA perspective

 

[dscher]

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[dscher]

Dow in that 34k level. Buyers are there...just have to HOLD.

 

[Folster]

So far the theme to this year is Back to Reality.

Or maybe "Party's Over".

 

[dscher]

Or maybe "Party's Over".

We have some REAL momentum to the downside... Throw out oversold/overbought and predicting bottoms. Things get downright nutty with this kinda correlation and fear.

 

[dscher]

@Folster Margin call Monday no doubt...

 

[Folster]

We have some REAL momentum to the downside... Throw out oversold/overbought and predicting bottoms. Things get downright nutty with this kinda correlation and fear.

Remain patient and wait for the babies being thrown out with the bath water.

 

[Finito]

@Folster Margin call Monday no doubt...

CANT WAIT- Bart Scott

 

[Finito]

Is it bad that I’m super excited

 

[dscher]

Remain patient and wait for the babies being thrown out with the bath water.

We are just now finally seeing full correlation based on advance decline...gotta wait for all sectors to sync up, hold your breath, and then we'll get our capitulation. IMO

 

[dscher]

Is it bad that I’m super excited

If we get some MASSIVE flush here in the next few weeks then there will be a huge counter rally... But, big but...we are getting into a consistent theme of volatility moving forward that will create huge swings to the upside and downside. It's gonna frighten a ton of new money. IMO

 

[Russ Smith]

Today is just a blood bath. I flipped over to CNBC just before open and they were speculating the futures might be misleading that it might be better today. Nope. IN addition to inflation and interest rates of course now we have Russia and Ukraine scaring the markets.

Dow is down over 10% now for this drop and Nasdaq over 15%, Nasdaq down 3% right now today alone. Don't even want to consider what that does to my spreadsheet I check every month. it's not all stock but enough that I'm sure I'm down at least 10% and probably more.

 

[82CardsGrad]

Today is just a blood bath. I flipped over to CNBC just before open and they were speculating the futures might be misleading that it might be better today. Nope. IN addition to inflation and interest rates of course now we have Russia and Ukraine scaring the markets.

Dow is down over 10% now for this drop and Nasdaq over 15%, Nasdaq down 3% right now today alone. Don't even want to consider what that does to my spreadsheet I check every month. it's not all stock but enough that I'm sure I'm down at least 10% and probably more.

Been a long time coming... High-multiple stocks with zero profits have been ripe for correction for a while now.
The next Fed meeting (tomorrow?), might provide some further clarity as to how they might behave over the balance of this year. If they signal a more hawkish position where 4-5 rate hikes are likely, I think the market will further crater... However, if they are a bit less hawkish and suggest perhaps, 2 rate-hikes, I think that would provide some comfort and aide to the market.
I also agree with others... 2022 will be a year of above-normal volatility. If you're lucky as a trader, you might do very well in that environment. Or, conversely, if your luck runs dry it could be an ugly year for traders...

 

[Russ Smith]

Been a long time coming... High-multiple stocks with zero profits have been ripe for correction for a while now.
The next Fed meeting (tomorrow?), might provide some further clarity as to how they might behave over the balance of this year. If they signal a more hawkish position where 4-5 rate hikes are likely, I think the market will further crater... However, if they are a bit less hawkish and suggest perhaps, 2 rate-hikes, I think that would provide some comfort and aide to the market.
I also agree with others... 2022 will be a year of above-normal volatility. If you're lucky as a trader, you might do very well in that environment. Or, conversely, if your luck runs dry it could be an ugly year for traders...

I think they basically already signalled 2 or 3 rate hikes. The problem of course is the rate hikes should have started in 17 and didn't because Trump knew everything and insisted on lower rates. Eventually they HAVE to go up to combat inflation, as rates go up, people save more and then less spending lowers inflation. Trump wanted higher stock returns.

I just looked at Fidelity, they don't count today yet but my portfolio they manage for me actually isn't as bad as I feared. It will be worse when today closes but right now they're only down 4-5% not 10 like I was fearing.

It's long term I won't panic but definitely might delay my retirement plans a bit if this persists.

The worst part is even with inflation, the CD rates etc have not gone up much at all because the rate hikes haven't really started.

January is going to suck on my spreadsheet that's for sure.

 

[82CardsGrad]

I think they basically already signalled 2 or 3 rate hikes. The problem of course is the rate hikes should have started in 17 and didn't because Trump knew everything and insisted on lower rates. Eventually they HAVE to go up to combat inflation, as rates go up, people save more and then less spending lowers inflation. Trump wanted higher stock returns.

I just looked at Fidelity, they don't count today yet but my portfolio they manage for me actually isn't as bad as I feared. It will be worse when today closes but right now they're only down 4-5% not 10 like I was fearing.

It's long term I won't panic but definitely might delay my retirement plans a bit if this persists.

The worst part is even with inflation, the CD rates etc have not gone up much at all because the rate hikes haven't really started.

January is going to suck on my spreadsheet that's for sure.

Some "smart" Wall Streeters are thinking there is a better than 50% chance of the Fed doing more than 2-3 rate hikes... we'll see I guess.

As for CD rates... the 10-year is holding below 1.75! That will change when the Fed initiates its' rate hikes.

 

[dscher]

Some "smart" Wall Streeters are thinking there is a better than 50% chance of the Fed doing more than 2-3 rate hikes... we'll see I guess.

As for CD rates... the 10-year is holding below 1.75! That will change when the Fed initiates its' rate hikes.

I think the bond market is calling the feds bluff here. The 10 yr and 30 yr are indicating that they dont believe the fed can raise because of economic conditions, and if they in fact do raise...the bond market won't like it one bit and yields will fall as a result. This would also cause the yield curve to go a direction the fed doesn't want.

 

[82CardsGrad]

I think the bond market is calling the feds bluff here. The 10 yr and 30 yr are indicating that they dont believe the fed can raise because of economic conditions, and if they in fact do raise...the bond market won't like it one bit and yields will fall as a result. This would also cause the yield curve to go a direction the fed doesn't want.

Correct me if I'm wrong...but, if the bond market "won't like it," wouldn't that mean that yields would increase? Assuming your context behind "won't like it" means there won't be buyers/less buyers of bonds...

 

[Russ Smith]

Some "smart" Wall Streeters are thinking there is a better than 50% chance of the Fed doing more than 2-3 rate hikes... we'll see I guess.

As for CD rates... the 10-year is holding below 1.75! That will change when the Fed initiates its' rate hikes.

Yeah I'm still seeing.6 to .7 in the 1 year which is terrible but actually better than my current 1 year is getting.

IF Trump had done the right thing years ago and started raising rates, when Covid hit we could have lowered rates to cushion the blow without being so incredibly low. We'd still have inflation coming off the Covid closures but he created a situation where it made no sense to NOT be in stocks due to such low rates.

And I'm not just doing hindsight i was saying that his entire presidency when inflation starts, and it will, we're going to pay the price for how low the rates are. his claim was low rates give you more room to rise, but the reality is to get up to a meaningful rate you have to do several rises, or big ones, and those spook the market.

Oh well at least it's not quite as bad as I feared in my Fidelity but still bad

 

[dscher]

Correct me if I'm wrong...but, if the bond market "won't like it," wouldn't that mean that yields would increase? Assuming your context behind "won't like it" means there won't be buyers/less buyers of bonds..

Not in this situation. IMO. There are always a lot of factors involved, but the way I see this one is the bond market doesn't trust the fed and their narrative. If it did..then you would see bond investors heavily punishing bond prices. Higher yields in the 10 and 30 yr. Strong, growing economy.We have been flat to almost consolidating for the past year. Which means the smart money (bond market) doesn't think the economy is all the fed makes it to be. I think they see a full recovery and are now retracting. Rising yields will punish a stagnate/deflationary economy. So long story short... This kind of scenario sees institutional big money leaving risk assets and moves (money has to move in their case) into safer assets like the long bond. We could very well get a panicked temporary yield spike though in the process. JMO..

 

[Folster]

Correct me if I'm wrong...but, if the bond market "won't like it," wouldn't that mean that yields would increase? Assuming your context behind "won't like it" means there won't be buyers/less buyers of bonds...

He's thinking the bond traders would call the Fed's bluff about raising rates while the economy is faltering or nearing a recession. Demand for long term bonds would go up quickly causing yields to go down. That can then turn into an inverted yield curve where short term rates are inexplicably higher than long term rates. Not a good sign for the economy.

It's important to remember, the Fed doesn't control rates, it can only influence them. Supply and demand are still in the driver seat.

 

[dscher]

It's important to remember, the Fed doesn't control rates, it can only influence them. Supply and demand are still in the driver seat.

This is true. But on the flip side...in many ways, they do. Influence and confidence...along with the massive liquidity are huge drivers that in a way have become a self fulfilling prophecy nowadays. The fed is pretty much the short end...and the massive bond market is the long end, which has over time always followed the short end. So they absolutely control the inevitable money flow. IMO.

 

[BigRedRage]

man, I cant get back in until march or april after I sell my home but there is some of the best dip ever being put together right now. Starting to look like that feb/march 2020 dipping sauce.

 

[dscher]

DOW fighting to recapture that 34k level... The bull vs bear battle begins.

 

[dscher]

Got clobbered, then that early week bounce I was looking for... All in one full swoop. That was a lot of upside reversal, so we'll see if it sticks. But good levels to hold for anyone bullish.