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most on here though
My case for WES:
- WES is classified as Consumer Discretionary. I know, and actually remember explaining to you, that consumer discretionary stocks perform poorly during stagflation. This is not just because in such periods, too much money is chasing select goods (usually oil, but we've just seen the same happen to other goods such as fruits and medical supplies), but because consumers don't have much money left over due to the economic downturns that come with stagflation, and so they won't spend on what they won't need - that includes consumer discretionary products. WES would suffer during such periods. Ergo, a contrarian approach ala Buffet would entail buying WES at a low price in preparation for Australia's consumption-led boom. Come said boom, WES' price skyrockets.
The problem was that I bought WES at just below $56, because I had not properly developed my technicals. Knowing what I know now, I would have bought $500 worth at around $51.50 and just waited.
- WES, being a conglomerate, has what Buffett would call a 'wide moat' - IOW, a massive competitive advantage over the competition. That means it's well-equipped to weather downturns and then clean up the proverbial mess.
- It's well-equipped to weather downturns because its business operations are highly diversified (another example of diversification reducing risk without markedly affecting returns), which makes it a min vol stock. In a volatile market, buying stable stocks seems like commonsense - which is why I haven't been able to bring myself to give away the proverbial TLS 'dog'.
- It's considered to be a high-quality company by global standards (strong financial health, not much uncertainty RE financial prospects). High-quality companies outperform in most conditions, including downturns and booms. That WES is a high-quality company also means that it won't suffer as badly from stagflation as other consumer discretionary companies, since it's a well-known name and so investors would be more inclined to hold on to it because they believe it can endure the downturn relatively unharmed.
- AUS is eventually going to enter into a consumption-led boom (not sure when - by the end of H1 2022, I suspect), and WES will benefit even more than most from that due to it being a diversified and thus very influential conglomerate on the AUS landscape.
- It pays a high dividend, which compensates for some of your capital loss. Such companies are attractive in unstable or bearish environments because of this, especially in light of the RBA's reluctance to raise interest rates. High interest rates make dividend-paying companies unattractive because you can get a better ROI by stuffing your money into a bank or by investing in financials.
- Looking at WES, it actually seems to have some qualities of a consumer staple, beyond being relatively stable - its share price actually increased during mid-2021, when interest rates and inflation remained low, despite the Australian economy being rocked by Delta. It's sudden decline after mid-August IMO can be put down to the Sept/Oct external energy shock that took place - it rose after that to end the year at around $60, before this newest round of stagflation caused its price to plummet.
My case against WES:
- I strongly suspect that we're in a bull trap, which will eventually turn into a decline. I agree with Mofra that I'd hold off on buying anything for the moment.
- I think WES may be overvalued ATM. Morningstar value WES at about $47.90 and CMC value WES at $53.55 (within a 5% range, so at least $51; at most $56.22). I've found Morningstar to be somewhat conservative with its valuations, plus quality companies tend to be more expensive than other companies, so it's true value is IMO anywhere from $51-$52.
- Nobody really knows what's going on RE the AUS economy. WES picking up suggests an improvement in consumer spending, which could mean that OMICRON has peaked in certain areas, but that doesn't mean that we're out of the woods yet. The situation is dangerously volatile.
My advice? Put $500 on a stop loss on WES for around $51.50 if possible. Using my own metrics, I wouldn't normally sell until it got to around $66, but in this market it may have to be around $60 (i.e. one standard error above the mean, which means the market on WES is turning very vaguely bullish).
Nah too much thinking for a simple man like me mate, I'll just consider buying it in a broader market pull back.My case for WES:
- WES is classified as Consumer Discretionary. I know, and actually remember explaining to you, that consumer discretionary stocks perform poorly during stagflation. This is not just because in such periods, too much money is chasing select goods (usually oil, but we've just seen the same happen to other goods such as fruits and medical supplies), but because consumers don't have much money left over due to the economic downturns that come with stagflation, and so they won't spend on what they won't need - that includes consumer discretionary products. WES would suffer during such periods. Ergo, a contrarian approach ala Buffet would entail buying WES at a low price in preparation for Australia's consumption-led boom. Come said boom, WES' price skyrockets.
The problem was that I bought WES at just below $56, because I had not properly developed my technicals. Knowing what I know now, I would have bought $500 worth at around $51.50 and just waited.
- WES, being a conglomerate, has what Buffett would call a 'wide moat' - IOW, a massive competitive advantage over the competition. That means it's well-equipped to weather downturns and then clean up the proverbial mess.
- It's well-equipped to weather downturns because its business operations are highly diversified (another example of diversification reducing risk without markedly affecting returns), which makes it a min vol stock. In a volatile market, buying stable stocks seems like commonsense - which is why I haven't been able to bring myself to give away the proverbial TLS 'dog'.
- It's considered to be a high-quality company by global standards (strong financial health, not much uncertainty RE financial prospects). High-quality companies outperform in most conditions, including downturns and booms. That WES is a high-quality company also means that it won't suffer as badly from stagflation as other consumer discretionary companies, since it's a well-known name and so investors would be more inclined to hold on to it because they believe it can endure the downturn relatively unharmed.
- AUS is eventually going to enter into a consumption-led boom (not sure when - by the end of H1 2022, I suspect), and WES will benefit even more than most from that due to it being a diversified and thus very influential conglomerate on the AUS landscape.
- It pays a high dividend, which compensates for some of your capital loss. Such companies are attractive in unstable or bearish environments because of this, especially in light of the RBA's reluctance to raise interest rates. High interest rates make dividend-paying companies unattractive because you can get a better ROI by stuffing your money into a bank or by investing in financials.
- Looking at WES, it actually seems to have some qualities of a consumer staple, beyond being relatively stable - its share price actually increased during mid-2021, when interest rates and inflation remained low, despite the Australian economy being rocked by Delta. It's sudden decline after mid-August IMO can be put down to the Sept/Oct external energy shock that took place - it rose after that to end the year at around $60, before this newest round of stagflation caused its price to plummet.
My case against WES:
- I strongly suspect that we're in a bull trap, which will eventually turn into a decline. I agree with Mofra that I'd hold off on buying anything for the moment.
- I think WES may be overvalued ATM. Morningstar value WES at about $47.90 and CMC value WES at $53.55 (within a 5% range, so at least $51; at most $56.22). I've found Morningstar to be somewhat conservative with its valuations, plus quality companies tend to be more expensive than other companies, so it's true value is IMO anywhere from $51-$52.
- Nobody really knows what's going on RE the AUS economy. WES picking up suggests an improvement in consumer spending, which could mean that OMICRON has peaked in certain areas, but that doesn't mean that we're out of the woods yet. The situation is dangerously volatile.
My advice? Put $500 on a stop loss on WES for around $51.50 if possible. Using my own metrics, I wouldn't normally sell until it got to around $66, but in this market it may have to be around $60 (i.e. one standard error above the mean, which means the market on WES is turning very vaguely bullish).
You saying my 1 cent penny stock isn't really worth 5? s**t.
Damn, that feels like a condensed moden day economics lecture.Thanks for the compliment.
Hmmm...I'm not so sure about that, at least over the course of this year.
What we're seeing right now are stagflationary conditions caused by internal/external shocks causing too much money to chase too few goods (because people are unavailable to deliver them to supermarkets). This in turn, is driving up energy prices and certain commodity prices, in particular the commodities which are most inelastic (demand for oil remains roughly constant no matter what the price because it's so widely used).
However, commodities as a whole underperform in such conditions because not all commodities are as elastic as oil, plus they are cyclicals - in recessionary conditions, cyclicals tend to suffer because people, and nations, buy what they need more so than what they want. Hence, in such conditions they'll purchase more oil than usual and purchase less of a commodity that they don't need as much. Plus high oil prices make transporting commodities more expensive (thanks Ordovician).
Plus, the Fed is clearly determined to end this state of affairs by hiking interest rates, which will supress oil/commodity prices (which is already happening), not just because high interest rates have a disinflationary effect, but also because oil/commodity inventories become more expensive to hold, cutting into the profits of oil/commodity companies. I reckon that this will occur by May/June, although the Russo-Ukraine conflict and serious Chinese stimulus will attenuate this effect. That said, I do not believe that Putin will actually take Kiev, and Chinese stimulus has been too tentative so far.
Put simply, I don't think we're seeing the start of a commodities supercycle so much as we are a bull trap which will eventually turn into a decline for both the US and AUS stock markets, since the US is entering into a disinflationary downturn due to Fed interference + inventory pileups + withdrawal of money from the US economy. I think the US stock market will decline first, but the ASX invariably follows because, being the world's remaining superpower, the US stock market declining spooks stock investors worldwide into fleeing their respective stock markets. This is especially true for developed markets since they tend to be so closely intertwined - Switzerland IMO is a partial exception due to its defensive focus, which is why I've invested in EWL. Emerging markets aren't a safe haven either, because they tend to be closely tied to China, which is experiencing its own slump.
After the slump (late H2 2022 probably), I do expect commodities to pick up, and that includes iron ore/coal since China will surely stimulate eventually. However, said commodities will include copper, lithium, graphite (thanks 00Stinger) and even helium due to increased space travel, so I'd place more money in those companies going forward. Coal is slowly fading into irrelevance. As for gold, that depends largely on the state of the UK economy, since that's the world's gold hub.
I respectfully don't think crypto will affect demand for gold very much - crypto's problem is that it's not a hard resource nor backed by one, the one country that has accepted it as legal tender (El Salvador) has faced legal problems as a result, and countries are moving to ban it - including great powers like China - because while it's not a ponzi scam in and of itself, it is being used to perpetuate them, and that's unacceptable for moral, ethical and pragmatic reasons - you can't afford to have ordinary people getting ripped off en masse; it hurts the economy.
EDIT: I do rate blockchain technology, but that's because it can be used to make data systems, including healthcare systems, unhackable. So I expect that to do well going forward.
Sees it drop in valueNice little announcement for CNB
