|Q1 earnings season has been full of enormous beats. Mega cap tech has once again shown the law of large numbers need not apply to it, as AAPL, GOOG, FB, AMZN and MSFT continue to experience growth any start-up would be proud to have. These companies are not only growing like weeds, but in many cases are buying back their own stock (AAPL, FB, GOOG).|
If you’re in the mood for a short podcast explaining why Apple’s capital return strategy is best in class and the stock remains a strong buy at current levels, I released a pod yesterday with my thoughts:
Paying a premium for any of the above stocks is reasonable – considering the cash they produce, their competitive moats and capital return strategy for shareholders, a basket of these companies I believe is likely to outperform the S&P (consider FCNTX if you want a mutual fund exposed to this basket), and has for years.
What would break my thesis? I too am interested in this question (in general, not just for FAANG/M), and actually asked investors Dan Loeb, Mario Cibelli and Yaron Naymark on Twitter. Here’s the response I got from Mario and Yaron:
The replies here to me show these investors pay attention to changes in long-term earnings, and are unlikely to let short-term earnings cause them to close a position. Yaron had some great thoughts on changing position size based on events that impact forward returns:
As an aside, I first heard of 1 Main Capital through this podcast with Andrew Walker and think it’s a great listen – I really like how Yavon walks through the thesis for RCI Hospitality (RICK) and his strategy in general. Also, if you’re interested in a great thesis on GOOG and some other names, check out 1 Main’s Q1 letter.
Thus far, companies that have reported this earnings season that I own have done nothing to break my long-term thesis and either have kept my picture of long-term returns the same (megacap tech, NOW, IMAX) or strengthened them (CROX). As a result, there’s nothing to do except continue buying the companies currently in my portfolio. As the crypto people like to say, I’m a HODLer on my own portfolio.