Market of Fools!
05 May 2021
This week I'm pounding the pavement on Pinterest: in the call held after the earnings release, CEO Ben Silbermann announced that they expect for the next quarter " flat year-over-year US user numbers". An analyst who was doing his job - a rarity - asked him to be more precise: " stable year-on-year, so does that mean down from last quarter??”. Silbermann's answer: " Yes, we noticed a negative correlation between the lifting of the lockdown and the time spent on Pinterest". Extraordinary! So now we have a company with $2 billion in sales, that doesn't make much/any money, that has a declining number of users in its main market (US 80% of sales), but that is valued at $40 billion. Too much.
One notch higher: Shopify ($140 Bn), which published its results this week. They proudly announce a " monthly recurring revenue " of $90M. You read that right: $90M, or a small billion on an annual basis. In the eyes of the current market, this justifies a valuation of $140bn! This is not going to end well.
On the other hand, Pfizer ($220 billion) - a major position of the fund (8%) - which published results well above expectations and raised its targets for the coming years, all driven by its products against Covid, does not see its price react... A market of fools (it is well in the dictionary). But this is not very dramatic: the fundamentals are good, the price should follow.
To finish with this market of fools, Warren Buffett and Charlie Munger have just raised the alarm this weekend at the Berkshire Hathaway meeting. Their words were violently criticized, notably by the trading site Robinhood, which considers that " "[...] the Warren Buffetts and Charlie Mungers of the world act as if they were the only oracles of investment. [Robinhood has opened the doors of the financial markets to ordinary people, profoundly destabilizing the old guard who will fight to keep things the same ". In my opinion, having both passed 90, they are not here to start controversies but just to try to warn people that this is not going to end well. Unfortunately, I doubt they will be heard.
Have a good week,
Charles
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