Do you know what multiple homebuilders traded at in mid 2000s?/Sentiment/Restaurant biz
I will be taking next week off for the first time since December and writing sporadically, if at all. Most likely the latter. Happy 250.
I expressed yesterday that I felt it was much more informative to value a highly cyclical business relative to sales rather than earnings to get a fuller picture of the multiple. After hearing again yesterday that Micron was cheap, trading at only 7x earnings, I want to highlight that Toll Brothers was trading at 6x earnings in 2006. I heard then it was cheap. After falling by 75% by late 2008, its stock was trading at 30x earnings. For a highly cyclical business, it was thus better to sell perceived ‘cheap’ and buy ‘expensive.’ To also say again, this is no advice or opinion on where Micron and other memory/storage stocks go as maybe the strategic customer agreements being signed smooth out the business volatility and a higher multiple is deserved but just trying to recommend a broader way to value stocks such as this.
While some investors now are seemingly waking up to the fact that hyperscaler free cash flows are disappearing, I want to point that this started in Q4 2025 when Oracle was punished when investors realized how exposed they are to OpenAI, along with raising its CapEx plans to 75% of revenue (now at 100%) from 10% in 2022, something I’ve been pointing out for many quarters now. Meta has crushed it revenue wise over the past three quarters because of its robust base business but investors have punished the stock after each reporting period because the CapEx figures keep going up. Dot, dot, dot, you get the point again. We are in the midst of a major transition from what was market leadership over the past 15 years to eventually something else. These mega cap tech stocks, incredible companies that have had historic market performance are going to go from growth stocks to value I believe, and that evolves over time but marked by years of underperformance relative to other things.
With respect to the Apple product price increases reported yesterday, I just wanted to put percentage changes behind the absolute price changes. The MacBook Neo, its new laptop, is seeing a price increase of 17%. The MacBook Air is rising in price by 18%. The 14 inch MacBook Pro will cost 18% more while the 11 inch iPad Pro is going up by 20% and the iPad Air will be higher in price by 25%. The history of technology on pricing is deflation, always has been and always will be and what makes this price increases eye popping, but we are just in one of those cyclical periods where it’s not for reasons we’re all well aware of.
I wanted to do a quick stock market sentiment check because the Investors Intelligence survey is getting very close to be extreme as I define a 40 point spread between Bulls and Bears. Bulls rose to 55.8 from 51.9 (as of last Friday) while Bears dropped to just 17.3 from 21.2. Those are levels last seen back in February. In the AAII retail investor survey, Bulls rose by 8.3 pts to 44.9, the most since late April while Bears fell to 36.1, the least since mid May. The Citi Panic/Euphoria index remains well in Euphoria at .82, double the threshold of .41. The only metric that is the reverse of the above is the CNN Fear/Greed index which was 25 yesterday, ‘Extreme Fear.’
Darden reported yesterday and because of its wide breadth of restaurant chains in terms of customers served, it’s always a helpful call to go through. They say, “Full service dining is a variety seeking category, and we have a collection of brands that give us reach across multiple dining occasions, guest demographics, price points, geographies, and cuisine types.” The stock was little changed and they said this:
