This is the Value Investor podcast with Tracy Rinek, all things value all the time. Welcome back value investors. The fang stocks have sold off double digits, at least at their lows. Some have bounced off the double digit lows now.
But you know what I've been asking and I know many of you have been too because you've been tweeting at me wondering are the fang stocks cheap? Is it time for value investors to buy or are they traps? Now we've talked about this topic several times over the last couple of years, even here on the Value Investor, just taking a look at the fang stocks to see if maybe they're getting in our wheelhouse, maybe they're cheap versus their peers, which is a form of value and which ones are the cheapest out of the group. But in this case, we actually have a full-fledged sell-off in these shares.
And so it is a good time to take a look again and see what's going on. Maybe some of these are actual value stocks here, not just cheap compared to peers, but values based on fundamentals. So remember, a value stock is obviously a cheap stock. It really has a low PE or price-to-sales ratio and the street is usually ignoring it or doesn't like it for some reason.
But a value trap is a stock that looks like a true value. So it might still have that low PE or price-to-sales ratio, but the earnings part, the E, doesn't look so great. Usually it means earnings are expected to drop this year or next year depending on where you are in the year when you're looking at it. But usually you see a decline in those earnings estimates going forward.
So why would we want growing earnings? That is because the growth in the earnings usually indicates something pretty good is going on there, right? That's the whole point of the company is to grow the earnings. And it shows that the company is still moving forward.
And again, some good things might be going on there because who wants to buy a company where earnings are going down? I don't. That's kind of depressing, right? You want someone who's crushing it, who's growing, who has a plan to get bigger, get more dominant, all those things.
And that's where I want to see it in the earnings growth. Now, sometimes there will be a situation of peak earnings, especially like we have right now with an event kind of scenario with a pandemic. We may get some distortions in earnings. So when the pandemic hit, we all were stuck at home and we all ordered online.
So anyone with online retail or any kind of online entertainment, like the streaming services, all saw a huge gain in earnings, subscribers, revenue, all of that. And now two years into the pandemic, some of that may be coming out and the bubble may be deflating a bit and might be more normalizing for the earnings. So we may see some earnings fall on those type of companies that were really impacted by the event of the pandemic. We also may see that in like some cyclicals as well.
Those kind of tend to have the peak earnings I've talked about and with like the home builders possibly having peak earnings. So they may be cheap on a PE basis, but those earnings are going to be declining at some point. So they may have some trappiness in there. So be careful on the cyclicals depending on where you are in the cycle, right?
You're getting to the end of that particular cycle. That's when you're going to see it start, the earnings start to fall and you're going to get a little bit of the trappiness there. Now we really haven't had to be concerned about falling earnings that much with the fang stocks over the last, you know, five to 10 years even because the paying stocks are the fangs, right? They've been crushing it.
They've been growing those earnings and those sales, but that might be changing here in 2022. You know, we have inflationary pressures, we have we're coming off of the highs of the pandemic for those that were pandemic winners. And so it's going to be interesting to take a look and see what's actually going on with the earnings. Now I haven't looked at any of the fangs for quite some time, like in detail, other than maybe Facebook because I, you know, everybody's been talking about its declining earnings there.
And but otherwise I haven't, I haven't really taken much of a look, but now that we have this big pullback and in some cases it's a huge pullback and some of these stocks, then you know, it's going to be interesting to see what is really going on behind the scenes with fang. So remember the fang stocks are meta platforms formerly known as Facebook. So that's the ticker fb Apple Amazon Netflix and then Google is the G but now known as alphabet. So interestingly enough out of the five two of them have changed their names now.
I doubt we'll see that with the other three, but who knows? I didn't really think Google would now be alphabet either. So anything can happen, but those are the five and some people on Twitter call these the generals. They are the ones, you know, mapping out the strategy of the overall stock market, right?
Because they're all trillion or mostly trillion dollar companies, huge mega caps. They own some I like to call them the sure things because everybody owns them, but maybe they're not so sure right now they're all on sale, but let's dive in and see if any of them are true values or if they're traps. Okay, so we're going to go in order for the fang. So we're starting with meta, which was Facebook ticker fb.
It now has a PE. This is the forward PE of just 14.9. Wow. I haven't looked at that in a while.
Last time I checked it was like 16. Now it's just under 15 14.9. That is an all time low for Facebook. Five is 1.06 almost going below that one level that shows that there's both growth and value.
So I'm liking both of those things on a fundamental level. What have these shares done? That's how we're getting this low PE. The shares year to date down 42% now.
So pretty dramatic crashing of the meta stock here. Two years they're up, but only 8.1% over the last two years. S&P as reminders of about 40% or so in that same time. So well underperforming the S&P now thanks to this big sell up year to date.
So what are the earnings looking like? As I mentioned just a minute ago, they are expected to be on the decline. We already knew this a couple months ago when Facebook said, hey, by the way, we're investing in meta and we're going to be spending all this money and it's going to hit our earnings. So they're expected to decline 7.2% this year.
So last year they made $13.77 expected to make 12.78. But all this was before they were actually shut down in Russia. Not sure how much that's going to impact them over there. The analysts haven't made any changes, so we don't know yet.
And then 2023 next year analysts expecting a bit of a rebound of 18% to 1514. So 1377 down to 1278 a share, then back up to 1514. But we'll see how those numbers stack up as we get closer to 2023. Sales, revenue side, so expected to be up 12.2% in 2022.
So I'm liking that. And 2023 up 17.6%, advertising is still the driver with Facebook. And remember, they own Instagram and WhatsApp. Instagram is still very popular.
And so they have some good things going for them outside of the meta platform part of the business that they're trying to develop. So what do I think about meta? Is it a value or is it a trap here? I own it in my own personal portfolio.
I have for years. I have not been adding at these lows, but after taking a look closer at what's happening with the actual numbers and how cheap it is. I don't know. I might start accumulating again here because this, even though we have the decline here in 2022, I do like that it's supposed to pick up again next year.
It doesn't feel real trappy here, but I have been on the sidelines because I did feel like I might be able to get the shares even lower than where they are here, even further down than 42%. But maybe I'm just getting greedy. I don't know. But we will see.
So meta platforms at the looking like a value here with a little bit of trappiness, but if you can get it even cheaper, then it's even more of a deal. And if you're a long term investor, you may be patient and wait to get it even further on sale if it gets there. So let's jump on forward to Apple. Take our APL.
This one we know has not been cheap for quite some time, but you to date the shares are now down 8.4%. They were down 10. They've been down 10% two times now. So that's the correction level.
They're not yet in like a bear. So it's down, but it's not really out yet. Nobody's panicking and selling cell panic. Two years, these shares are still up 125%.
So holding on to almost all those gains, it's gotten during the pandemic. 20, 22 sales expected to be up 8.5%. This is fiscal 2022 fiscal 2023 6.8%. So no longer growing at the 10% level and it hasn't been for a while.
So my issue with Apple has been what are you paying for those shares? PE has fallen. It's now at 25.6 times. It wasn't 32 the last time.
I think I talked about it. So it has come down off of those highs still not not cheap by any means not even cheap for Apple. Remember when Warren Buffett bought it in 2016, it was trading like under 10 times and it traded under 10 times for many years there in the last decade. This is this decade and you're still just not getting it that cheap.
It has a peg up too. So not as cheap as Facebook on the peg and what do the earnings look like. So this is some earnings growth here. So 2021, they made 561 fiscal 2022 expected to be up 9.8% to 616 and then another 8.5% to 668.
So you're getting the growth. So there's no trap here, but you're not really finding value. The shares are not down enough for me on Apple to accumulate here. Sorry, sorry, Apple fans.
It's a little bit cheaper, but not cheap enough for me. So keep that in mind if you're interested, but if you are a devoted Apple follower, the shares have gone on sale with this 8 to 10% correction. So you are still getting them cheaper than you would have prior to this move, but it's not really a value by any metrics not yet. Okay, let's switch on to the other Amazon ticker AMCN.
This is another one I own in my own personal portfolio. I don't own Apple, just to let you know. I guess I'll just inform on each of these holdings. I've never owned Apple and I just I won't buy it unless it gets real cheap.
It's Facebook cheap, then I'm interested again, but it's not there. Okay, so Amazon, yes, I have owned this one for numerous years, even though on a PE level, it was not cheap when I bought it, but sales for 2022 expected to be up 15%, 2023, 17%. So it's still holding on to that strong sales growth that it got during the start of the pandemic, but shares year to date down about 17% now. Not as many people watching the Amazon stock as Facebook or some of these others, but this is a pretty dramatic downward slide in Amazon that we haven't seen for quite some time.
Two years, it's up 46%, but that's mainly because in that first year, it got huge boost off of the start of the pandemic and then it's basically gone nowhere for the last year. So over the last year, the shares are down 6%. So it was going nowhere and now here in 2022, more selling in the shares, pushing it down almost 17%. So just a reminder though, over the last two years, shares are up now 46%, but the S&P is up around 40% or so, so just barely beating the S&P 500 during that period.
What does the PE look like now? It's trading among the lowest that I can recall in maybe ever. I didn't go back to look and see what it did in the March 2020 lows, but the PE is now at 53. So that's low for Amazon, but obviously not low as a value stack.
Peg is at 2.14, so that's not that low either. But earnings also interesting, expected to be down 21% this year. So they were a pandemic winner. They made 64.81 in 2021, expected to make only 51.18 here in 2022.
And they got a lot of inflationary pressures, rising costs, logistics, transportation, freight, all that stuff is expensive. They're driving things around, they're flying things, places and gasoline, all that is more expensive. So that's all going to be in play here. But Amazon is raising the price of prime membership, try to cover some of these costs and analysts expect 2023, a big rebound up 42% on the earnings to 7309.
So we had 64.81 in 2021, 51.18 here in 2022 is expected. And then analysts bullish again, optimistic about 2023 at 7309. So not a value based on the fundamentals. It is a little bit cheaper here than it has been.
And it looks like it's breaking down. It was just in that narrow trading range for about a year, but now we're starting to see it slide lower. So it could get cheaper here. And that would make it a little more intriguing, right?
I do wish they would have split these shares because I do think more investors would be buying Amazon if it had the share split like Nvidia did. But so far, they are not doing it. So we have to pay or do the share, the partial shares, which you can now do as well. So that's Amazon AMZN.
Then we're switching to the N, Netflix. Netflix NFLX, it was one of the, if not the best performing stock of the last 30 years, and certainly of like the last decade of the 2010 to 2020 period. But now it's seeing a big sell off here in 2022, you're to date down 40%. Reminder the S&P is just down about 10, two years now it's down 2%, even though the S&P is up 40%.
So this is a rare two year instance of underperformance for Netflix stack, which has been again the stock to own over the last two decades. What does the P.E. Look like now? P.E.
of 31, peg of 1.26. So neither one super cheap. I do like the peg a little more than the P.E. But Netflix used to trade with a P.E.
of close to 100 for many years there. Nobody cared what they paid for because it's really all about subscribers, right? But if you're caring what you're paying for it now, know that the P.E. It has come way down and is pretty low on a historic basis for Netflix.
So what do those earnings look like? Expected to decline 3.4% in 2022 to 10, 86 from 11, 24 that they made last year, 2023 up 29% though to 13, 99. Now part of Netflix's issues always has been that has to pay out a tremendous amount of money to make all that content. And then it has to convince people to subscribe to have some big winning winners over the last couple of years, including the crown and squid game.
That was one of its big ones that just won some SAG awards. So they are still able to convince us to subscribe to get that content and almost nobody's doing the content as well as Netflix. But enormous costs involved in trying to find winning hits to keep us all entertained. So keep all that in mind.
I've never owned Netflix and I never wanted to because I don't like the businesses that have no moats because there really isn't much of a moat with entertainment and or the type of business where you do have to keep finding the hits and finding creative hits in some kind of either music or film or publishing. And if these things is a difficult endeavor and you do have to spend a lot of money for sometimes little return. So I don't like those kind of businesses. I like the kind of businesses like Apple where I'm just buying the iPhone so they make tons of money off that or I'm in the app store there.
They're making a ton of money off subscription businesses. They too have some content generation but it's not the entire business. So Netflix and FLEX and it is by the way a ZX number four sell right here. So some of the analysts a little bearish on it.
I forgot to give the ranks on some of these others. Facebook is a three hold Apple is the number one right now. A strong buy right here. Amazon a three hold as well and then Netflix the four sell but it's not at the five.
So it's not the strong sell just maybe a little bit of weakness in those earnings. So do I consider Netflix to be a value here? It's got a little bit of the trappiness because those earnings are on the decline but expected to rebound pretty sharply in 2023 and shares are cheaper. They're not super cheap.
So I'm not total fan of it as a value. It has a little bit of trappiness not extreme but if you can get it even cheaper than where it is and you're already a fan then you might want to consider adding to your position if you get it cheaper. Okay, then we're going to wrap it up with alphabet ticker G O O G L Google the old Google and this one year to date down 8%. So it was down around 10 or a little bit more down 12 I think yes down at 12% of it's low so far.
And so it's rebounded like Apple has off its lows but still down 8% over the last two years up one oh five point seven that's versus 40% on the S&P 500 remember over the last six months I took a look at that just to see how we could spend even before 2022 and it's down 7.3%. So most of the pressure has happened mostly in 2022 with this growth stock sell off. So what is this story looking like so it's now trading with the P E of 21.6 alphabet has traded lower on a P E basis than this a couple of years ago when it was out of favor prior to the pandemic it was trading around 17 18 times or something somewhere in there if I recall correctly. So it was fairly cheap and we've done this podcast in the past I talked about that now it's a little pricier because the shares have been bid up over the last two years obviously up a hundred five percent so you're getting a little bit higher PE but on historic basis that's still pretty low for alphabet a PE under 25 has been low for alphabet peg is 1.09 that's pretty low too just like a meta it's trading close to that one level which would put it in the value category of you know value and growth which is kind of rare and these earnings are kind of interesting so earnings expected to be up about 5% this year so this is one of the few that is expected to rise here and they made a hundred and twelve twenty last year expected to make no yes one hundred and twelve twenty expected to make one seventeen seventy nine so that's why you get the five percent so it's not super dramatic increase but still you're not seeing them cutting the analysts do expect some growth on the earnings side and then 2023 much better again at up 16% to 137.02 and currently none of the analysts are really changing much so it's a rank three hold most of our stocks are rank three so it's no biggie especially these big caps which don't see a lot of adjustments to their estimates in between earnings season so number three hold on that and what the sales look like sales up 17.6% in 2022 and another 16.1% in 2023 I still cannot get over the sales growth on alphabet a company of this size I mentioned it forever for years I was in awe that they were doing 20% you know five years ago they're much much bigger now and they're still able to do 17% or 16% even just double digits even if they were only doing 10 as Apple has shown Apple's not even getting to 10 anymore because you just get so big you cannot grow those revenues at 20% forever that's always the old war and Buffett saying like you know no company can do 20% or more forever but alphabet seemingly bucking the trend for many many years here and actually as I I now own alphabet in my own personal portfolio I only bought it a couple of years ago before the pandemic but the reason I did end up buying it even though it wasn't a dirt cheap stock was because I did keep tweeting out about it sales growth and then I believe it was still doing it and I finally said you know what I want to own this because somehow they are doing it and so it was still an attractively priced growth stock when I bought it and it wasn't you know trading at 50 times earnings or anything like that it was like 20 or 25 times or something at the time so keep that in mind if you are a value investor looking around for some growthy type names because sometimes you can get them at attractive levels for the growth trajectory that they're on so I still like alphabets growth trajectory on both earnings and sales and so I don't consider it super expensive here at 21 times but if the shares would only slide a bit more if we could get you know a 20% correction in alphabet shares then then they're going to be even more you know attractive to me here I'm not adding to my position in alphabet and I haven't added anything in a couple of years but if it did sell off into that bare type of sell off then I might be interested so I also forgot to mention the Netflix sales so that's a good thing to look at too for Netflix so they're expected to see sales jump 12% in 2022 and another 13% in 2023 so the sales outlook doesn't look all that bad for Netflix here and they got you know the shares down 40% so if you liked them before at 40% higher you might really like them here but they do have a little bit of that value trackiness as I mentioned so keep that in mind so what's my overall take on the fang stocks here are they cheap are they really values here there's a little bit of value in some of them the most being in meta platforms FV we shouldn't be surprised right because everyone hates it and so what does a hated stock mean it means there could be value there and now it's trading under 15 times so again this is the lowest I can recall it ever trading even you know just after the IPO when it had that big slide because it didn't have the earnings then that it has now so this is a cheap stock it does have the decline in earnings expected here in 2022 that's a little bit of the trackiness part of it but they're still going to be making those billions of dollars on the advertising they still own instagram and they're still expected to rebound and bounce back now it all depends on if you believe in the meta and this change they're trying to make can they make this change these are all unknowns so the street doesn't really like that shares are down 42% year to date but sometimes when everybody's running the value investors need to take another look and maybe they should be running in so keep that in mind with some of these we also have not really seen the big type of sell-off we need to get dirt cheap stocks in either apple or alphabet I've kind of been watching both of those stocks so to me they're kind of the parameters of the overall market because they are so huge and everybody owns them but when or if those two break down then we could see maybe the end of the selling in this market capitulation I kind of consider alphabet and apple as the you know signs of the washout if we get a washout in those maybe maybe the 10 and 12% declines that both of them have had this year is all we're going to get and so we're done now I don't know this is march 9th 2022 when I'm recording so we've seen the hit a couple bottom so far in 2022 but the slide has continued but not so much in a few of these fang names I'd like to cover some of the fang man's names as well I'll do that on another podcast because I know some of you are interested in those that would be Microsoft and Nvidia as well as a few other top growth names that maybe we should be looking at here because the growth stocks are on sale but are they values those are two different things right so keep that in mind but don't be afraid to you know take a look at some of these growth stocks especially in the fangs because they still have good fundamentals and if we can get them cheap or dirt cheap and they're not a trap then more power to us and it would be time to dive in there so let's recap all the tickers again even though you know them all so there's meta platforms ticker fb there's apple apl amazon amz-n Netflix nflx and alphabet g-o-o-g-l and i own meta amazon and alphabet in my own personal portfolio and i've never owned Netflix or apple but never say never right always looking out there for some deals so be sure to subscribe so that you can continue to get all of the value stocks we're going to be talking about and there are a lot right now so i'm not having any trouble putting the other shows with the value investor podcast in 2022 this is our time to find some goodies out there so be sure to subscribe at apple podcast we're on spotify amazon music you can get us on soundcloud with the sex market edge as well that's my other podcast i do every week there's also stack picks on there but be sure to get us somewhere and i'll see you again next time with some revalley stacks this material is being provided for informational purposes only and nothing here in constitutes investment legal accounting or tax advice or a recommendation to buy sell or hold a security do not act or lie upon the information advice given in this podcast without seeking the services of competent professional legal tax or accounting counsel publication and distribution of this podcast is not intended to create any information contained herein does not constitute an attorney-client relationship no recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor it should not be assumed that any investment securities companies sectors of market sector that i've described were will be profitable all information is current as the data you're in and subject to change without notice any views or opinions expressed may not reflect those of sex and doesn't research as a whole