The total stock-market valuation of Netflix, Amazon, and Facebook is about $400 billion, or about the GNP of Sweden. Amazon stock sells for hundreds of times earnings, Netflix sells for over 100 times earnings, and Facebook sells for "only" 80 times earnings. Now, it's true that if you bought the three stocks a year or two ago, you'd have made a pile of money. And I missed the boat on all three. But nosebleed territory is not for me, because as soon as I bought Amazon at $320 a share, it would drop 20 percent, as it did from its high of about $400 a share. Life's too short to spend it throwing dice.
The financial news today is that Hewlett-Packard has decided to split into two companies. Now, I happen to know H-P well, because I spent a lot of time competing against them. As a matter of fact, in 1956 I remarked to the then Chairman of the Company I worked for, "H-P has just passed us in sales." His answer: "They'll pass us on the way down, too."
It never happened, and H-P went on to become a Goliath in electronics, before it lost its way, while being run by Carly Fiorina, Mark Hurd, Leo Apotheker, and now Meg Whitman. You know what all of these people have in common? They were all outsiders. Think of it: The Company was saying to its 300,000-plus employees, "We don't think any of you is capable of running this Company, so we're bringing in someone who hasn't worked for H-P for a day." This is not a knock on any of the chosen CEOs; I happen to think Meg Whitman is a very savvy manager. But really, doesn't it prove that at H-P leadership succession hasn't been a priority since Dave Packard and Bill Hewlett departed? So H-P is not on my stock-market shopping list.
Some trends are well established, and you would be a fool to ignore them. So you will probably not invest in newspapers and magazines. But if you dig down a bit further, you will find other trends worth noting. Shopping malls are likely to become dinosaurs, although it might take a while. So will movie theaters, as home screens get larger and cinema screens get smaller. It may take years for these trends to play out, but do you want to invest your hard-earned money in endangered species?
The price of oil has been tanking (pun intended) lately, and so the oil stocks have been falling. But this is not a long-term trend. There are just too many cars and factories dependent on oil. So if a dividend-paying oil stock is falling, that means the yield is increasing, despite the turmoil at OPEC. So not all collapses are bad, and though I am happy to see the pump price at $3.30, I am too much of a realist to sell my oil stocks.