3 Bargain Picks for 2023
I rambled a bit about $GOOGL, $THO, and $NVR and why I like them right now, each with Free Cash Flow (FCF) Yields above their 10-year averages.

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A brief takeaway from the article for each:

  • Alphabet - With the hype around TikTok and Chat GPT near all-time highs, the company may be trading at a slight discount. By no means deep value, but interesting here as I want Alphabet to be my horse in the AI race. Similarly, YouTube is my pick in the streaming wars, and Shorts (primarily thanks to starting to pay their creators) make the most sense to me for short videos (over TikTok). Time will tell, but I'll gladly keep adding around a 5% FCF Yield. Not to mention the cloud. And search. And the moonshots.

  • Thor - Its valuation is artificially inflated due to the cyclical nature of its industry (and it has crushed lately) -- but assuming the worst, it still looks cheap. Even if FCF is cut in half in 2023, it still will trade above its 10-year average FCF Yield. Using management's downside scenario for the next year, it would still trade at seven times Operating Cash Flow. Moreover, Thor's positioning is unbelievably robust, owning 50% of the market in North American motorized RVs and a 40% share of the NA towable RV market. Posting a positive net income every year since 1980, maybe this isn't such a cyclical pick.

  • NVR - The homebuilder's Return on Invested Capital (ROIC) of 27% is best in class among its peers, generating ample cash to fund share buybacks. Shares outstanding are down 36% in just the last decade. The stock is up 49,000% since its IPO in 1992, and I love its adherence to a capital-light model.

What stocks do you think are compelling bargains? Or what is your favorite in this group?

Thanks as always for reading. 🙏
What's your favorite discount?
90%Alphabet
5%Thor
5%NVR
20 VotesPoll ended on: 1/27/2023
Conor Mac's avatar
For me, its GOOG all day, whats yours?
Josh Kohn-Lindquist's avatar
@investmenttalk GOOG and NVR are core positions for me -- I'd pick GOOG just because of the excitement factor and optionality, but NVR needs less checking in, it seems like.

Thor is just fascinating to me though. Dominates what one would imagine to be a wildly cyclical industry, but has been profitable for 40+ years. Kind of amazing.
Buying Your Time's avatar
GOOG, however, NVR would be second.

Outstanding shares down 36% combined with an ROIC 27% in a market with plenty of room to grow, albeit through cyclical times, is an attractive investment. It's one of those "safe" investments you end up reading about in 100 baggers
Josh Kohn-Lindquist's avatar
@buyingyourtime Absolutely 👍

Maintaining a positive ROIC through the Great Recession is one of my favorite reasons for holding them. Love that steadiness in wild times.
Buying Your Time's avatar
@joryko I think for modern day investors, we are lucky in a sense because we have access to companies working on the "shiny new toys" i.e. AI, Genomics, Robotics, etc. But at the end of the day, or decade, the fundamentals are what will matter. They company can be boring or exciting.

Maintaining a positive ROIC through great recession is exceptional!
Reasonable Yield's avatar
NVR for me. wbu?
Josh Kohn-Lindquist's avatar
@reasonableyield Probably a tie between them and GOOG. NVR's smaller size leaves a lot more room for compounding, though, and the megacaps don't usually last forever so, it really is a tie. I just really like Alphabet's optionality looking 20 years out though.
Joey Hirendernath's avatar
$GOOG and then $NVR
Josh Kohn-Lindquist's avatar
@joeyhirendernath That seems to be the consensus -- no love for poor Thor so far. 😂

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