This article reviews recent market trends, highlighting gains in major indices while also pinpointing companies that haven't participated in the rally and may represent buying opportunities. We will also delve into concerns about the credit market, a major leveraged buyout in the video game industry, and a proposed tariff that could impact the movie business. Finally, we'll cover the "fail of the week," focusing on a peculiar business model and its clientele.
Portfolio Performance and Market Overview
My personal portfolios, including the passive income portfolio and the story fund, have seen significant gains this year, collectively exceeding $100,000. These portfolios are both compounding, indicating a positive trend for future growth.
The broader market is also experiencing a strong year, with the S&P 500 up 13.4% year-to-date, indicating a robust bull market. Investor sentiment has shifted from concern to optimism, particularly toward major tech companies, the Magnificent 7. This enthusiasm has driven the QQQ up by 17.4% year-to-date.
Five Companies Still Representing a Good Deal
While the overall market is up, some companies haven't kept pace and remain relatively cheap. I am highlighting five companies that I believe are still buys:
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S&P Global
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Amazon
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Adobe
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Constellation Software
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Copart
Market Valuations and Caution
The S&P 500's forward price-to-earnings (PE) ratio has generally increased since 2008, reflecting economic recovery and higher profit margins for top companies. However, the PE ratio has recently returned to all-time high territory, similar to levels seen in 2021. The Magnificent 7 are trading at much higher PE ratios than the rest of the market. While not suggesting market timing, I advise caution amidst widespread bullishness and focus on reasonably valued companies.
S&P Global
S&P Global is a financial sector company in my portfolio. The stock price is now below $500 per share. Key metrics include:
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A forward PE of 27 (25 based off of 2026's earning)
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Free cash flow yield of 3.6% Despite this, the stock is in the red year to date.
Amazon
Amazon is another company I own, and consider to be an especially good deal. Key metrics include:
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Company is completely flat from the beginning of the year.
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Over the past 5 years, the stock has only gone up 40% despite revenue doubling.
Adobe
Adobe is a company I do not own but am still interested in. It has an excellent free cash flow yield and the share price is depressed. Adobe is down 18% year-to-date, and 26% in the past five years, but its revenue growth is consistent.
Constellation Software
I usually do not talk about this company, but am still interested in it. Constellation is down 17% year-to-date but still up 150% over the past five years.
Copart
The company is a global online platform for salvaged, used, or damaged vehicles. Copart is down 20% year-to-date.
Concerns in the Credit Market
The credit market is generating concern among some Wall Street veterans, including Howard Marks, who suggests investors are making poor deals. The article in the Wall Street Journal cited that "The worst loans are made at the best of times." Marks believes that with people being flush with cash, they may not be looking closely at the terms.
EA Electric Arts Going Private
EA Electric Arts is going private in a $55 billion leveraged buyout involving investors including Saudi Arabia's public investment fund. A leverage buyout involves a lot of debt. I think the video game industry already has a problem with microtransactions, and this buyout will put further pressure on these companies to monetize and monetize.
President Trump's Proposed Movie Tariff
President Trump is threatening a 100% tariff on movies made outside the United States, arguing that foreign countries incentivize Hollywood production to shoot overseas. The specifics of how this tariff would work are unclear, and Netflix is currently shrugging it off pending further details.
Fail of the Week: Baby Naming Consultant
A San Francisco woman charges up to $30,000 to name babies. This business includes baby branding campaigns and genealogical investigations. The "fail of the week" isn't the consultant, but the customers who pay such exorbitant fees to outsource this personal task. Paying someone to do this is dishonorable to the family line.