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