Munson Defines What Is a Value Stock

On December 15th, 2023 I was asked to discuss value stocks with Oliver today. He was generous with time and allowed me to really get into what value means. First is the more common idea of value that has to do with the price of the stock compared to its book value, or Price to Book. You know, mostly sectors that are old economy, slow growers like energy, materials, banks, industrials. Most value ETFs are doing this. This is helpful when you want to get broad exposure to cheaper, lower valuation, more established stocks that pay dividends.

Then you have what I consider true value investing, which is looking for a dollar you can buy for 50 cents. You could say today that Google is an example of mega cap growth stock that some may say is a value stock today. What about Apple back in 2013 when it hit the bricks on slow iPhone sales? A true value stock is a great company that has for some reason fallen out of favor with investors but can turn around.

My point is to always ask the question, is this stock or ETF claiming to be a value investment just a slow growing, mature dividend payer (of which the valuation could be quite high), or is this a great company that has fallen on hard times that can be an outperformer in the future? It’s an important distinction.

CNBC The Exchange Lee Munson talks dog food and doggy stocks

Such a fun hit with Kelly Evans. Chewy, GameStop, Dollar General. Each one tells a larger story about the zeitgeist of our time.

The millenial firm that thinks any retail niche can be sold like SAAS. The meme stop with negative growth on about everything but Pokemon cards. The poverty trade Wall Street doesn't get. I even drop a few parting thoughts on Disney - and I'll let you know when I fall back in love with the Mouse.

Talking Buffet's 13F with Seana Smith

Chatting it up on the 13F Berkshire released this week.

Bottom line, I'm more interested in what wasn't in the 13F - Japan stocks. You see, a 13F shows the stocks the firm owns inside the US, not international. It's not just the trading houses, or Soga Shosha, that are interesting, it's the valuations, cash flow, decreasing debt, and pure earnings after a 30 year recession that Japan may be getting out of.

Also, when asked what I "liked" in his top 5 holdings, I summed it up from the high level, Apple represents the big US growth sector, BAC the value arena, and OXY the energy/commodity/beat up value arena. Why not buy some index funds instead and make it easy on yourself? Individual stocks take patience and nerves of steel.

Munson of CNBCs The Exchange: Done with Disney

Great time chatting about my big looser - Disney. My main thesis that parks had infinite pricing power is no longer the case. So, I'm moving on. If you have a new thesis and want to buy it down here, cheap, losing money in streaming, unclear if Igor will pull it off again, go for it. I have other things I want to do with my money.

Also, we talked about Affirm, which I think is not a commodity as many say, but it's still losing money.

Finally, Instacart is really intersting because they can make something called a profit. Sure, it's really because they are selling ads versus being profitable delivering groceries. But ask yourself, does it really matter? What Instacart ONLY made money selling ads and never made money delivering things?

Overall these stocks represent core ideas in markets - that streaming has killed the easy profits of cable and the system won't get fixed anytime soon, that the consumer may not be as strong next year as today, and that firms in the gig economy need to figure out how to stop losing money. How you play that or not is up to you.

Fox Business Maria Bartiromo Talks Apple and Jobs with Lee Munson

I'm still thinking about my Friday interview with Maria Bartiromo - we talked about Apple's inevitable slowdown and reliance on services, but the real story is that iPhone sales will continue to be important - why? You may see 25% margins on iPhones and 70% margins on services - but what people don't get is that Apple has it's own hedge fund in Nevada that invests the float between sales and paying vendors. Yes, they get a 60 day float! For those value players that just can't understand why these firms keep printing money, it's the structure of these firms that has never existed before.

Then it's just some obvious stuff on jobs data - forget stressing about the numbers and focus on wage growth.

CNBCs Kelly Evans Asks Munson About Tech Earnings

Kelly Evans asked me to come on and break down the biggest names in tech announcing earnings after the bell. It's a bit of a continuation of our chat a few weeks ago when I was in studio.

MSFT is straightforward. Hype around AI and Copilot aside, most of the revenues come from Cloud services with a fat 70% margin. That is the driver.

GOOGL has a similar issue that ads are how the firm makes it's money. I love YouTube, but it's only 10% of the business. Some analysts are talking up their own third tier cloud service, but it just started to turn a profit.

V - Visa is all about the macro environment. Sure, they are a great firm that prints money, but if we get a slowdown with the consumer and the actually spend less, investors may question why a firm that is growing at 10% a year is worth 30 times earnings. I would rather buy great companies at a good price.

Time will tell. You can also just buy a low cost tax efficient index fund as and get exposure to these mega cap names. But I love to look at these firms because they tell us about the broader economy. Sometimes, stocks are worth more as macro indicators than specific investments.

CNBC Power Lunch Lee Munson MSFT, LULU, SCHW

What fun to be in person on the awesome sets at CNBC. Tyler and Kelly wanted my take on how trade or position MSFT, LULU, and SCHW.

My take was pretty simple. MSFT has a great opportunity with AI by bolting on what they call Copilot to Office products. I'm just unsure how investors are going to feel about the losses at first.

LULU is just a great company that has the unusual skill of appealing to my teenage daughter, yet it doesn't freak her out that her dad also wears the stuff to the gym. What other clothing brand can do that? The valuation is high, so some caution here.

Then SCHW, who for full disclosure is our primary custodian at my firm, has been hit hard with the duration challenges from rate hikes at their banking arm. This will pass over time, and now that the merger with TD Ameritrade is over, I expect the net new assets that were negative recently will flip to positive.

So, all good firms, but buying individual stocks is difficult, riskier than a simple tax efficient index fund, and should be looked at the dessert, not the main dish. And yes, there is nothing wrong (and a lot of things right) by just keeping things simple and sticking to basic index funds with an appropriate allocation. And if you must dabble, start slow.

CNBC Power Lunch The 60/40 Mix Was Never Dead

I made my return to being on set at CNBC with Power Lunch. The producers were kind enough to give me a few hits during the show and great to see the gang over in Englewood, NJ.

The other guest was a nice guy from a big LA firm. It was his first time on set and I can just imagine what that feels like - I've been there before 15 years ago and he did a great job. We agreed on rates, as in this is a huge buying opportunity for long dated treasuries as well as short. We also agreed that while long term markets look good, all one needs is a single rate hike, a Fed official saying something the news media misquotes, or a day to end in "y" and we could see a proper sell off like early October.

Then I got the question I really wanted - defend the 60/40 mix, as if eating a well balanced meal is ever out of style. But in doing that I was able to showcase exactly how I run my stock and bond mix and my game plan going forward. It's easy to explain when you are the one making the decisions.

Lastly, I do want to state for the record one thing I don't agree with the other guest: private credit. Illiquid, high fees, fully taxable. If you think as a retail investor you are going to get a good deal before all the other massive sovereign wealth funds, hedge funds, insurance firms, pension funds - come on even pension funds get low quality stuff in the grand scheme of things, then you are California dreaming and I'm looking at a long cold winter. But then again, I'm not a favorite of inside my own industry because I'm always trying to cut costs and be more efficient.

Oil and Banks on Friday the 13th

I love doing a TV hit on any Friday the 13th. I see it as good luck not bad. While the focus started out on oil prices, the effect on markets will be more about a hot CPI print due to energy and food prices. This further complicates Fed policy. For me, it just means don't get surprised, keep you eye on the longer term trend.

Then Maria wanted to talk banks. So in perfect Lee Munson fashion, I break down the major banks and what really matters. Each has something they want to sell Wall Street on. But in the end, nothing really matters but the expansion (or lack thereof) their loan books.

Munson on CNBC The Exchange with Kelly Evans August 2023

It's a Friday and that means fun, easy segments with lots of energy. Well, CNBC delivered today when they asked me to talk about 13Fs from the big dogs in the business, Buffet, Tepper, Burry. A 13F is just a regulatory filing to show the SEC what you owned on the last day of the quarter, so it becomes public about 6 weeks later. So, nobody knows when they bought or sold something or even if they still have it - so you take it with a grain of salt.

We talked about NVDA and chips in general having the issue not simply with valuation - but the risks of getting chips to markets from the foundries. Then we breezed through Expedia (competing against the credit card points economy), CVS (Marc Cubans is competing for the high profit, somewhat evil pharmacy benefits management business), and I had good things to say about housing going forward and DHI is the leader there.

My point is to dig deep when looking at individual stocks. Don't just buy something because a big hedge fund or Warren buffet bought it. Holdings on a single day, revealed six weeks later is just a list of stocks that could have some potential.