Cash flow, profitability and weirdly undervalued Russell 2000
Wall Street Breakfast
Seeking Alpha
4.1 • 1K Ratings
🗓️ 25 February 2024
⏱️ 6 minutes
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| 0:00.0 | Austin Hengowitz, you host Rich Habits Podcast, writer for Seeking Alpha. |
| 0:15.2 | Think it might make the most sense to start broad picture how you're looking at the market. |
| 0:19.6 | Yeah, of course. So the first big theme I have right now in my brain, it has to do with cash flow, right? Profitability and cash flow. |
| 0:29.0 | 2022, we saw the stock market collapse because a lot of these especially unprofitable |
| 0:34.7 | technology companies and even the big you know magnificent seven names even you know they |
| 0:39.1 | weren't exactly called that in 22 but I mean we saw meta stock collapse Google Amazon Apple they were all you know |
| 0:44.9 | trading down 20 30 50 60 percent and that's because they over hired they weren't |
| 0:50.1 | exactly focused on profitability but instead focused on growth and we were |
| 0:54.1 | obviously in the zero interest rate environment so you know everyone was |
| 0:58.4 | focused on growth well I would think that now 23 we saw sort of that |
| 1:02.4 | flip there of wait a second the market's now |
| 1:05.3 | beginning to give a little bit more sort of assigned value rather to companies |
| 1:11.3 | who are focused on profitability and cash flow. |
| 1:13.6 | So in my opinion now looking forward to, you know, 2024, those are the things I'm looking at. |
| 1:19.8 | I fully believe that if you can predict the cash flow, you can predict the stock price. |
| 1:25.8 | I'm not saying that you can predict it one to one here, but if you have general ideas that a company's operating cash flow, free cash flow margin, things like that are going to |
| 1:36.9 | trend higher over time. I would also argue that the stock price will reflect that in a positive way over the same period of time. |
| 1:44.1 | We saw that with Meta, we've seen that with Salesforce, and I think we'll begin to now see that |
| 1:48.5 | with Draft Kings and Sentinel One. I think those are two names recently that have been exciting to me because you know you think about these sort of new |
| 1:57.7 | SPAC, newly IPO companies that we saw in 20, 2021. Of course the markets didn't know how to value them, right? |
| 2:05.4 | The stock prices were all over the place and we saw that, you know, with all these |
| 2:09.2 | unprofable technology names and some of them never bounce back, right? |
... |
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