Hey, Ross here:
Some of the market’s most familiar names now carry a surprising price tag.
Take a look at what investors are paying for them.
Chart of the Day
This table compares five big tech companies, shown in black, with a group of slower-growing businesses in red.
Focus on two columns: “Revenue Growth” and “Forward P/E.”
The first shows how fast sales grew over the past year. The second shows how much investors pay for each dollar of expected annual profit.
Costco’s sales grew 10.1%. Its stock trades at 44.4 times expected earnings.
Microsoft grew faster, at 17.9%, yet trades at just 25.2 times expected earnings.
Walmart also trades above 40 times earnings, despite sales growth of just 6.2%.
Now look at “Capex % of Revenue.” Those tech firms are pouring far more of their sales into equipment and facilities. Investors are worried about whether that spending will pay off.
So there’s a reason for the discount.
And this goes beyond a few familiar names.
The bright blue line tracks the price investors pay for expected earnings from low-volatility stocks – names that tend to swing less. Read it against the right-hand scale.
That price has climbed back to about 19 times earnings, near its highs for the year. Meanwhile, the dark blue line shows the broader S&P 500 getting cheaper on the left-hand scale.
In other words, investors are paying more for the stocks they see as safer.
But paying a premium to escape one risk can leave you exposed to another.
Insight of the Day
A safe business can still be a risky stock.
People will keep buying groceries in a bad economy.
That doesn’t mean you can pay any price for Walmart and expect a good return.
When investors get scared, they crowd into businesses they trust. The shares rise, and each dollar of profit gets more expensive to buy.
Eventually, steady growth may no longer be enough to justify the price.
The company can keep selling more goods and earning more money – while its stock falls because buyers won’t pay such a high premium anymore.
That’s the danger of buying a stock just because it feels safe.
I’ll trade a boring business if the setup is right.
But a “safe” name isn’t a substitute for a good entry.
That’s why – especially when it comes to these kinds of names – one of the strongest buying signals I look for…
Is when the people inside the business put their own money behind it…
Like when one long-time CEO recently put $3 million of her own money into her company stock in her first-ever open-market purchase…
Despite the fact that she had been there for over a decade.
Insider signals like these has helped us identify stock moves of 771% in two months, 157% in two weeks, and even 321% in two days.
And later today at 3 p.m. Eastern…
I’m going LIVE to walk you through how you can start following high-level executives just like this one to huge setups 99% of traders will miss.
It’s free to attend, but seating is limited…
So if you haven’t already…
Click here to guarantee your free seat…
And I’ll see you later today at 3 p.m. ET.
P.S. If you’re planning to attend on a mobile device, make sure you download the presentation app now so you don’t miss anything when it starts. See you there.
iOS: apps.apple.com/us/app/goto/id1465614785
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Customer Story of the Day
"I started a few months ago and started implementing the simple strategy with $1000 and have seen a return of over $300.
Ross makes trading very understandable and if you follow along you will make money even with the losers.
Probably the best thing you learn is risk management!"
Embrace the surge,
Ross Givens
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