The BuyChart of the Day: Cage Fight

Elon Musk and Mark Zuckerberg have apparently agreed to a real cage fight – MMA style. Most people are surprised but hardly anyone’s shocked, especially because it’s Musk’s idea. But Zuck has the advantage because he’s a Jujitsu student. This is all so bizarre. The fight, if it happens, is obviously a juvenile gimmick. But some see it a fight that will decide the fate of social media. That’s a tad dramatic.

Now to the chart. We ran Musk vs. Zuck (TSLA vs. META) through The Buycaster, and the conclusion was strange, maybe even eerie. They have the same Buycaster Rating! We double-checked the behind-the-scenes calculations – they’re fine. So, in the Buycaster universe, this cage fight is a draw as of today. Both companies are risky bets. But just like in the real cage fight, we would give the edge to Zuck – we suspect Meta’s operating cost structure and capital expenditure will improve over the next few years.

Note: The Buycaster Rating is a score of out 10, which signifies how rational it is to expect the stock to deliver our required return (ours is 80% cumulative within 5 years). The higher the scrore, the more rational it is, and the more likely we are to buy the stock. The ratings are a combination of Sanity & Safety. Sanity refers to “what needs to happen in the business for us to – rationally – expect the stock to generate our required return”. Safety refers to the potential capital loss if revenue growth is anemic over the next 5 years. Generally, we like stocks with overall Buycaster Ratings above 9, which implies high Sanity and Safety. You can unpack these Buycaster Ratings in granular detail in The Buycaster.

The BuyTheme of the Day: Media & Entertainment

Let’s broaden the scope of the Cage Fight. We used The Buycaster for a quick survey of the big Social Media stalwarts (we included Google because it’s the big advertising rival). Twitter is not public anymore, so we put Tesla in the mix, just to annoy Elon (he’s not reading, it’s fine):

The Buycaster Rating is a score of out 10, which signifies how rational it is to expect the stock to deliver our required return (ours is 80% cumulative within 5 years). The more rational it is, the more likely we are to buy the stock. The ratings are a combination of Sanity & Safety. Sanity refers to “what needs to happen in the business for us to – rationally – expect the stock to generate our required return”. Safety refers to the potential capital loss if revenue growth is anemic over the next 5 years. Generally, we like stocks with overall Buycaster Ratings above 9. You can unpack these Buycaster Ratings in granular detail in The Buycaster.

Macro Dose: Fedibility

Jerome Powell seems dead set on maintaining the Fed’s credibility by erring on the side of caution. Credibility refers to the general confidence in the market that Fed will bring inflation back to the long-term targe of 2%. The topic of a central bank’s credibility sounds like a boring topic, but it’s one of the most important pillars of modern society. We’ve discussed this before.

So, the market expects higher rates for longer. And so, equity markets may take a short-term hit. But then Mr. Market may wake up tomorrow and say, “wait a minute, the Fed may overshoot, and then economy slows, thereby reducing inflation, and forcing them to start cutting rates again in a year. So, I better get me some stocks before that happens!” Classic Mr. Market. It’s time to regurgitate our favorite cartoon. Sorry, we’ll keep using this one.

Many Happy Returns!