Last night WDAY offered guidance during their analyst day and people fucking hated it. The subsequent result has been bloodshed this morning, as people shimmy the fuck out of high valuation software name and into retail shit-houses like PIR and BBBY.
BMO came away from WDAY Rising with neutral incremental views. They remain positive on WDAY opportunities in financial solutions, though they believe that a gradual slowdown in HCM could limit consolidated growth, particularly given the relative size differential, with HCM being about 81% of subscription revenues. They believe that management signaled that M&A could play a meaningful role to generate new revenue/market opportunities. They think valuation is reasonable though not inexpensive given growth metrics; Market Perform, $225 tgt.
Without question, high valuation names have been adversely affected by the We Work IPO debacle. There is now a disconnect between private valuations and public. As such, the sectors with the highest valuations, namely SAAS, have been sold. This of course is also the case due to a slowing economy. But I am not sold on this idea entirely, since software creates high productivity and also opportunities for cost savings. Nevertheless, this is where we are now. As such, I sold out of my SAAS names today.
The sector is off sharply, nearly 3% for the session.
The best sector in the market continues to be residential construction, an obvious winner with rates sinking and the price of real estate near record highs.
Here are the top industries ranked by Sharpe ratios now.
Tough tape for tech and healthcare. If you’re managing accounts now and don’t know where to go, go to cash. If you must be invested, try diversifying you fucking brainlet. We’re in a rate sensitive environ, so gain exposure to industries that offer yield, such as the one’s on the list above.
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Wait, valuations matter now? I thought we could just blindly buy-and-hold good companies, and not worry about price?
AAPL, 20 PE
MSFT: 28 PE
AMZN: 73 PE
11% of S&P 500 market cap
REITs and utilities are crowded plays from dividend-seekign investors.
Utilites with PE above 15, just for a 5% dividend? Those stock prices aren’t recession-proof. Invetors will rotate into them, but then if the amrket gets hairy, all stocks will be sold. Will be a great move to short in the later innings when recession is compeltely evident.
5% can generate a doctor’s level salary if one is wise in their younger years. At that point capital and income become distinct. As long as the fucks don’t cut the divi…which is always on the table.
5% is great – but it’s not guaranteed.
My point is that a 5% dividend doesn’t cover a potential 10% (or greater) capital gains loss.
Utilities typically have near-zero grwoth, but also steady profits. However, because of dividend Supply and Demand, the PE of these stocks have risen well above thier historical sector average, so they are higher risk than they were in th past.
Crazy how much software is selling off because of Workday.
Zillow looks primed here