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February 22, 2020

Avoiding the Disrupted and Attractive Dividends

Avoiding the Disrupted

Overcomplicating things is seldom on the path to investment success. The stunning ascension of Tesla has confounded, in a manner no less than stupefying, the investment thesis of many. We don’t profess to know the value of Tesla, but suspect sales and profitability forecasts commensurate with a near $200 billion capitalization are more than optimistic.

Source: Bloomberg, Holger Zschaepitz

Readers of our previous notes know that we have not been a fan of the automotive industry. Rather than trying to value industry disruptors such as Tesla and Amazon, a simpler approach might be to use caution when selecting investments within industries undergoing rapid change. The charts below suggest caution has been long warranted for investors in the automotive and retail sectors.

Source: Stockcharts.com, Mark Ungewitter

Neglected Valuations and Dividend Yields

Sitting between the mega cap growth stocks and historically yield oriented investments such as utilities are a universe of stocks with relatively low valuations and attractive dividend yields. The first chart below shows the divergence between the haves and the have-nots.

Source: CNBC

The next chart shows a recent divergence between the earnings and valuation, of the top 5 stocks by capitalization, within the market.

Active managers may find many companies with both attractive valuations and dividend yields.

 

The information and data contained in this presentation were obtained from sources deemed to be reliable, but Applied Finance makes no guarantee as to the accuracy or completeness of any such information or data.

This presentation is not an offer to buy or sell any security.