Wall Street is too oriented on the next 3 months, not the next year.
> They didn't know about ml, gaming and crypto.
Or they do and they ask those questions to see if the company selling those products understand how important the markets are. I work in a profession (due diligence) where asking the simple questions (e.g. why do your GPUs need fans) is far more important than the complex ones (e.g. what is the thermal resistance threshold before a chip melts?). People are pretty harsh on MBA types on HN, but they aren't stupid people; in fact, usually the opposite.
> Wall Street is too oriented on the next 3 months, not the next year.
So then why are Facebook, Amazon, Netflix and Google PE Ratios so ridiculously high?
Lastly, if you're so confident about your assertions, this is a great example of where you can truly "putting money where your mouth is".
If you're buying from pure DD, you'd either better know something special about the targets financial situation, know some synergy or externality you can exploit, or know the business better than management (be careful, sijnce that's often only possible because their MBAs are ignorant). You're looking for a fool, and if you can't spot him, it's you.
Why are the P/Es of FANG so high? Because the market hopes they are monopolies.
What does this mean exactly?
> You're looking for a fool, and if you can't spot him, it's you.
Ok?
> Because the market hopes they are monopolies.
Which implies they aren't just looking at quarterly performance....
Pure DD are the Due Diligence details of an acquisition (cashflow projections, product roadmap, receipts/debts, IP value, employees) . If you are buying on those details (e.g. what the company says about their own views of the market/products/customers/suppliers) without looking more broadly (e.g. macro tech or econ etc) outside of what the company selling that business (and for whatever reason doesn't want it) believes then you're in a fools game. Not only are they incentivized to sell you on the highest price with cherry picked numbers/concepts, but they are the VERY MBAs who couldn't make that business work. They are looking for a fool too, and you better know why they think they're doing better than you!
I assume you know this since you're in the DD business for the long haul, but there are plenty of people who "just want to get the deal done", because that's how they get paid, ABC (always be closing).
>Which implies they aren't just looking at quarterly performance....
In contrast to saying that smart money was looking at quarterly performance (only the poor CFOs and retail investors do that), you will see my reference to supplier/customer pipelines, as well as, HFT. So yes, smart money has priced FANG as monopolies, which is a much larger view than quarterly revenue/profits and likely influenced more by private insight than public announcements.
They are auto buying into these companies without considering financials or anything else. When someone buys into those funds, money is automatically allocated into those shares.
The next crash is going to be pretty heavy because if a large portion of people those those funds try to pull out their money, it's going to pull the entire market down.
The combined value of all assets held by roboadvisors is still under $50 billion, whereas the combined value of the worlds Capital Markets is around 115 trillion.
Also, there was never a time when retail investors were looking at balance sheets and estimating future cash flows. Index funds fix the problems of inefficiency created by retail fools like the guy above who thinks a professional NVIDIA analyst doesn’t know about cryptomining.
So how does a company reach S&P500 status in the first place? Yup, you guessed it, physical people have to place orders based on financial fundamentals. For reference, Facebook's PE ratio when it IPO'd was 85: https://en.wikipedia.org/wiki/Initial_public_offering_of_Fac...
> and robotraders.
Betterment is $10B AUM and Weathfront is $8B AUM. Those are considered the two largest robotraders and they are a blip in the $7T AUM of the S&P500 (roughly 0.2% assuming they have all of their assets in the S&P 500).
> They are auto buying into these companies without considering financials or anything else.
So who set the price when the auto buyers didn't' exist?
> it's going to pull the entire market down.
Great! Guess what, you can short the market if you'd like and make a ton of money if you're right!
Why is this everyone's go to when trying to discount someone about stocks? It isn't like the market isn't due for a serious correction but I never gave a date. If I knew when, then sure, I would!
I have my money where I believe it's best and you probably have the same. I'm just here discussing. Not telling anyone what to do. As I said in the other comments around this, I meant passive as a whole. I guess I shouldn't have said just those two.
You're reading my comment wrong then. You made a very assertive conclusion with zero precedence or sources to back the claim up. Without that it's simply conjecture. So I'll have to ask again...is your position on this so strong that you're willing to put money down? If not, then, uh, show us evidence, maybe? Otherwise, it's more helpful to a discussion to state it is an opinion, rather than as a truth.
I find the same to be true in engineering. Often simple questions sound stupid, but they lead to improved communication. Because more often than not everybody thinks they're on the same page. Especially experts on some topics tend to this kind of thinking. However a lot of the things they think "everybody knows" are not known by others. Simple questions bring this to light.
(A) the fact that the analyst you're talking about is paid for their opinions and you're (most likely) not, means that with high probability you're wrong.
(B) what's the utility of assuming other professionals are dumb, and building an investment strategy that will work against dumb professionals?
But, on the other hand, trading professionals need retail investors to think that they know better then professionals.
That said I knew of a person working as a trader who was one a team of 20 young guys taken on fresh from uni - at the end of the year the company sacked the 18 guys who lost money and told all their clients about the 2 whizz kids who had just had an amazing year. If the professionals all knew so much I'm not sure why those 18 people would have failed to turn a profit.
For any profession, i'm pretty sure i can find you a crackpot who is convinced they know more than the pros.
The fundamental difference is that trading is partially an art. Medicine is too, but like two hedge fund managers will have pretty different outcomes, but two surgeons will have similar outcomes.
Hell, there's even jokes about it, mostly involving Web MD and/or Holiday Inn Express.
Some parties argue that the ICI is an indicator of how much fundamental analysis Wall Street is doing - high ICI, insufficient fundamental analysis. I think this is a somewhat plausible argument. Apparently the ICI has been high in the last few years - supposedly suggesting relatively little money doing fundamental analysis.
Anyway, this is good for you, bad for Wall Street; if you’re an educated investor and you have some industrial insight, it might be worth investing some of your money on opportunities that Wall Street hasn’t picked up on (like Bitcoin, a few years ago).
The complexity of GPUs (i.e Volta with it's 22B transistors) and the required software is getting to the point I think only one player will emerge. It won't be AMD.
The Volta based automotive processor they showed off at CES is pretty impressive.
Also bought GM. They seem to know what they are doing with EVs, and I'll bet them over Tesla. GM also pays a decent dividend.
Seems AMD doesn't have the resources to produce quality software, much less R&D into new fields such as Nvidia.
Nvidia is not just targeting their GPUs for automotive, but addressing the issues of reliability and safety in that environment. That's a lot of effort. If AMD can't write a driver that does not crash, there is no way in hell they will compete in AI where safety is a concern.
Wall Street not understanding tech that much isn't as important if Wall Street can react to the price change.
> If you think you have an edge on people who are paid to do a job
As I said, they are too concerned with the next three months, not the next two years.
Also, like how many people on wall street specialize in nvidia analysis? And I do think that it's possible for an amateur to beat a professional under certain circumstances.
Also please listen to the earnings call. It should be the Q2 one.
You have superior knowledge of 1 particular company because you're operating in your domain of expertise. An average consumer will have no idea what Nvidia is, what they do, and why they should invest in it instead of index funds.