So what price to put on a stock that's earning a FCF yield of...

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MarsC

4,290 Posts.

467

04/02/21

13:18

Post #: 50705984
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Originally posted by madamswer: ↑

"And it will probably go higher, as the bull market enters full-blown euphoria. Just crack open another bottle of bubbly! Cheers. Hic!"

Hic! indeed.

I was at an informal forum last night where a group of fellow investing enthusiasts were having a few beers and debating the state of investing markets.

Part of the discussion involved sharing and debating ideas under the broad headings of Best Speculative Investing Idea and Safest Investing Idea.

As his Safest Investing Idea, one member of the group suggested, "Go Short Cash" [*]

While it was obviously a tongue-in-cheek recommendation, it does perfectly encapsulate what is happening in the world right now, and goes a long way to informing why a company such as ARB is being valued like it is.

Of course, how it all looks in one-, two-, three-, or five years' time, is anyone's guess.

[*] This particular gentleman has a yen-denominated account and he related the anecdote where the institution in Japan which was holding his capital on his behalf was actually taking money out of his account each month, a result of the negative prevailing interest rate being applied.

We all had a laugh at this amusing account.

Then this morning, out of interest, I checked to see what kind of interest rate I was enjoying on the cash I hold.

I was somewhat shocked to see that I, as a depositor here in Australia, am only one or two more very small adjustments from also being charged interestfor the privilege of letting some financial institution enjoy the use of my capital(!!):

View attachment 2879323

When that happens I daresay that a stock trading on 20x P/E (which historically traded on 15x P/E) might suddenly no longer look like an unattractive investment!

.

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So what price to put on a stock that's earning a FCF yield of circa 20% ?

ARB Price at posting: $38.59 Sentiment: Sell Disclosure: Held
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