Valuation ...Smaluation

Some guys outta pocket, talking exotic

You barely been to the Bahamas thats another topic?-Sean Carter (God Did)

Lies, it’s all lies.

Gordon Gekko once said “Greed is Good“. He clearly never read any religious text ever written, but I digress. Every decade or so we hit this American plateau where the pigs get fat and the hogs get slathered. 2000's dot com bust, 08' mortgage crisis. We figured something was right around the corner when covid came and stalled the country. The Fed printed more money than ever and inflation rose it’s ugly head like we all expected. Now the doom and gloom of a recession was upon us. Or was it ? At least that’s what our most trusted news sources from twitter and reddit told us. Now that we know it won’t be an onslaught, we can really see what happened. Crypto took a beating due to a few questionable players but all and all we should be okay. But ...but....but wait it gets worse!!! Overvalued over-inflated company valuations still prop up a good amount of founders. Do we not say anything? Do we sweep it under the rug? Do we call it out? Should we march? This WILL come to affect us at some point. Companies that are cash heavy and cashflowing will be just fine but those founders who sold the dream but no balance sheet to back it up may be in for a rude awakening. Over selling yourself made sense five years ago. Investors knew we were five years from a correction but no one expected covid except Bill Gates. It was akin to mom and dad coming back home from vacation earlier than expected in the middle of your house party. (Cue Snoop Gin and Juice video).

So what do we look for when it’s time to be conservative?

Cashflow. Seems simple enough, cash is king and solves most problems as long as the debt facility isn’t too strenous.

Moat. What makes the company defensible? In?case another competitor wants to come in and eat their lunch? Is the tech propietary? Are they the best in the world? Does the company have a competitive advantage. Is Beyonce a client?

Strategic Alliance. Does the company have a system or strategy that almost gaurantees clients, customers, sales. Is their a subscription model with brand that has a chokehold on the market.

Government commitment. This isn't necessarily as important but I like these type of sectors.?At my firm we have a current focus on Sustainability or ESG (Environmental, social, and corporate governance) including?Affordable Housing intitiatives. Basically doing what's best for the enviorment, the people, and swaying corporate corruption. Mainly because Uncle Sam is giving money to those sectors and taking it from those that don’t adhere. This isn’t communism but helps make the world a better place (which I guess was the intent of communism). So less smog, making sure normal income people can live in decent neighborhoods, and make livable wages.

Incentiving firms for pushing that along is a win win. Those that choose not to... well Uncle Same giveth and Uncle Sam taketh away.

What other market sectors do you see advancing in the next half a decade?