{"id":108516,"date":"2017-07-05T10:50:42","date_gmt":"2017-07-05T14:50:42","guid":{"rendered":"http:\/\/countingpips.com\/?p=108516"},"modified":"2017-07-05T06:52:00","modified_gmt":"2017-07-05T10:52:00","slug":"checkmate-silicon-valley-in-one-move","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2017\/07\/checkmate-silicon-valley-in-one-move\/","title":{"rendered":"Checkmate Silicon Valley in One Move"},"content":{"rendered":"<div id=\"inves-3825337215\" class=\"inves-below-title-posts inves-entity-placement\"><div id =\"posts_date_custom\"><div align=\"left\">July 5, 2017<\/div><hr style=\"border: none; border-bottom: 3px solid black;\">\r\n<\/div><\/div><p>By <a href=\"http:\/\/WallStreetDaily.com\/\"><u>WallStreetDaily.com<\/u><\/a> <img loading=\"lazy\" decoding=\"async\" class=\"attachment-home-th size-home-th wp-post-image\" style=\"display: block; margin-bottom: 5px; clear: both;\" src=\"https:\/\/s3.amazonaws.com\/wallstreetdailywebsite\/wp-content\/uploads\/2017\/06\/0717_checkmate_feature.jpg\" sizes=\"auto, (max-width: 580px) 100vw, 580px\" srcset=\"https:\/\/s3.amazonaws.com\/wallstreetdailywebsite\/wp-content\/uploads\/2017\/06\/0717_checkmate_feature.jpg 580w, https:\/\/s3.amazonaws.com\/wallstreetdailywebsite\/wp-content\/uploads\/2017\/06\/0717_checkmate_feature-300x155.jpg 300w\" alt=\"\" width=\"580\" height=\"300\" \/><\/p>\n<ul>\n<li>Don\u2019t get suckered into an expensive stock.<\/li>\n<li>My ingenious ratio keeps the market honest.<\/li>\n<li>Silicon Valley\u2019s \u201cfab five\u201d are <em>not <\/em>dirt-cheap.<\/li>\n<li><strong><a href=\"https:\/\/pro.agorafinancial.com\/m\/704719\" target=\"_blank\" rel=\"noopener\">Also recommended: The culmination of my life\u2019s work\u2026<\/a><\/strong><\/li>\n<\/ul>\n<hr \/>\n<p>I don\u2019t care what investing legend you idolize and try to emulate \u2014 Buffett, Graham, Lynch \u2014 they all share a common recommendation.<\/p>\n<p>They favor buying undervalued stocks and selling them when they\u2019re overvalued.<\/p>\n<p>Or more commonly: \u201cBuy low, sell high.\u201d<\/p>\n<p>Of course, if you\u2019ve invested for more than a week, you know this is easier said than done.<\/p>\n<p>Undervalued (cheap) and overvalued (expensive) are such subjective measures when it comes to investing.<\/p><div id=\"inves-3030411256\" class=\"inves-in-content inves-entity-placement\"><hr style=\"border: 1px solid #ddd;\">\r\n<div id=\"inpost_ads_header\">\r\n<p style=\"font-size:10px; float:left; color:#666;\">Free Reports:<\/p><\/div>\r\n<div id=\"inpost_ads\"> \r\n<p style=\"font-size:15px; float:left;\"><a href=\"https:\/\/goo.gl\/1ApBOV\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/investmacro.com\/wp-content\/uploads\/2018\/06\/graph_techs_PD.png\" align=\"left\" width=\"80\"  height=\"55\"\/><\/a>\r\n\t     <a href=\"https:\/\/goo.gl\/1ApBOV\"><b><u>Get Our Free Metatrader 4 Indicators<\/u><\/b><\/a> - Put Our Free MetaTrader 4 Custom Indicators on your charts when you join our Weekly Newsletter<\/p><br><br>\r\n<br>\r\n<br>\r\n<p style=\"font-size:15px; float:left;\"><a href=\"https:\/\/goo.gl\/f3RrHX\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/investmacro.com\/wp-content\/uploads\/2019\/01\/cot_pie_80.png\" align=\"left\" width=\"80\"  height=\"55\"\/><\/a>\r\n\t    <a href=\"https:\/\/goo.gl\/f3RrHX\"><b><u>Get our Weekly Commitment of Traders Reports<\/u><\/b><\/a> - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.<\/p><br><br>\r\n<\/div>\r\n<hr style=\"border: 1px solid #ddd;\">\r\n<br><\/div>\n<p>Most times we end up guessing \u2014 and most times we end up overpaying.<\/p>\n<p>But today, I\u2019ll show you one amazingly simple way to always buy stocks that are truly cheap.<\/p>\n<p>It\u2019s especially sage advice given the recent heights of the benchmark indexes.<\/p>\n<h2 class=\"subhead\">Hunting for \u201cLow-Density\u201d Stocks<\/h2>\n<p>All you have to do in order to invest like Warren Buffett or any of America\u2019s most successful investors \u2014 and rack up easy double-digit gains \u2014 is to buy what I call \u201clow-density\u201d stocks.<\/p>\n<p>I define density like this: the value the market assigns to the cash that a company has in the bank.<\/p>\n<p>A high density ratio means the market overvalues the cash.<\/p>\n<p>A low density ratio means the market undervalues the cash.<\/p>\n<p>The reason I focus on cash is straightforward: It\u2019s the most tangible, liquid asset \u2014 and the easiest to value.<\/p>\n<p>After all, $1 is worth $1. So it\u2019s easy to tell when you\u2019re overpaying or getting a discount.<\/p>\n<p>Here, I\u2019ll illustrate this concept with a simple example\u2026<\/p>\n<p>To calculate the density ratio, we simply divide the price per share by the cash per share (total cash divided by shares outstanding).<\/p>\n<p>So say Company XYZ trades for $1 per share and has $1 per share in cash.<\/p>\n<p>In this case, the result is 1.<\/p>\n<p>Take note, though\u2026<\/p>\n<p>Such a 1-to-1 ratio (share price to cash) is extremely uncommon.<\/p>\n<p>Most companies have density ratios well above 1. (Yawn.)<\/p>\n<p>But if you find a stock with a density ratio below 1 \u2014 well, that, my friend, warrants immediate attention.<\/p>\n<p>Let me explain\u2026<\/p>\n<p>Say a stock is trading for $7.50\u2026 but it\u2019s worth $10 in cash per share. That\u2019s a density ratio of 0.75.<\/p>\n<p>Or it\u2019s the same as purchasing $1 worth of stock for 75 cents.<\/p>\n<p>Rest assured, whenever America\u2019s best investors can scoop up shares at a major discount \u2014 they do!<\/p>\n<p>And you should too.<\/p>\n<p>That\u2019s because these discounts, understandably, don\u2019t last for long.<\/p>\n<h2 class=\"subhead\">So Who\u2019s Flush With Cash?<\/h2>\n<p>These days, any worthwhile hunt for cash will lead directly to Silicon Valley.<\/p>\n<p>\u201cApple, Alphabet, Microsoft, Amazon and Facebook have recently become the five most valuable listed companies in the world, in that order. With a total market value of $2.9 trillion, they are worth more than any five firms in history,\u201d according to <em>The Economist<\/em>.<\/p>\n<p class=\"centered\"><img decoding=\"async\" class=\"centered aligncenter\" src=\"https:\/\/s3.amazonaws.com\/wallstreetdailywebsite\/wp-content\/uploads\/2017\/06\/kingsofcash_chart.png\" alt=\"The Five Kings of Cash\" \/><\/p>\n<p>Their mountain of cash is so epic it might lead you to believe that they boast favorable density ratios.<\/p>\n<p>Well, I went ahead and did all the heavy lifting for you.<\/p>\n<p>And armed with the data below, don\u2019t let anyone tell you that these five companies are dirt-cheap.<\/p>\n<p>The density ratios suggest that they\u2019re actually overvalued.<\/p>\n<p>So if you\u2019re building a retirement portfolio, I\u2019d argue against anchoring it with the fabulous five \u201ckings of cash.\u201d<\/p>\n<p>See for yourself\u2026<\/p>\n<p class=\"centered\"><img decoding=\"async\" class=\"centered aligncenter\" src=\"https:\/\/s3.amazonaws.com\/wallstreetdailywebsite\/wp-content\/uploads\/2017\/06\/table_chart.png\" alt=\"Cash vs. Shares\" \/><\/p>\n<p>Instead, I recommend buying the microcap stocks on the receiving end of all of the spending.<\/p>\n<p>Whether it\u2019s via direct business relationships with these mega-caps with billions in cash \u2014 or via an outright takeover.<\/p>\n<p>Apple, Alphabet, Microsoft, Amazon and Facebook together spent $100 billion last year.<\/p>\n<p>Their collective riches are flowing into emerging industries like autonomous vehicles, artificial intelligence, smart dust, drones\u2026 even immortality drugs.<\/p>\n<p>I know the benchmark indexes are all near historic highs.<\/p>\n<p>Nonetheless, it remains a really good time to be strategically buying.<\/p>\n<p>Ahead of the tape,<\/p>\n<p>Louis Basenese<br \/>\nChief Investment Strategist, <em>Wall Street Daily<\/em><\/p>\n<p>The post <a href=\"https:\/\/www.wallstreetdaily.com\/2017\/07\/05\/checkmate-silicon-valley-in-one-move\/\" rel=\"nofollow\">Checkmate Silicon Valley in One Move<\/a> appeared first on <a href=\"https:\/\/www.wallstreetdaily.com\" rel=\"nofollow\">Wall Street Daily<\/a>.<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>By WallStreetDaily.com Don\u2019t get suckered into an expensive stock. My ingenious ratio keeps the market honest. Silicon Valley\u2019s \u201cfab five\u201d are not dirt-cheap. Also recommended: The culmination of my life\u2019s work\u2026 I don\u2019t care what investing legend you idolize and try to emulate \u2014 Buffett, Graham, Lynch \u2014 they all share a common recommendation. They [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-108516","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/108516","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=108516"}],"version-history":[{"count":2,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/108516\/revisions"}],"predecessor-version":[{"id":108521,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/108516\/revisions\/108521"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=108516"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=108516"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=108516"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}