You’ve probably heard the old saying from Keynes that “The market can stay irrational longer than you can stay solvent.” Here’s a snapshot of how irrational things probably are right now and why we need to continue scaling into our highest-rated stocks like Apple.
Monster Drinks reported a horrific quarter last night, missing the topline estimates by nearly $40 million on a $580 million estimate and earnings came in even worse. Moreover, here’s the set up ahead for investors:
In August, New York state Attorney General Eric Schneiderman issued subpoenas to Monster Beverage and other energy-drink makers as part of the state’s investigation of the industry. U.S. Senators Dick Durbin and Richard Blumenthal have asked the FDA to take another look at the effect that caffeine and other ingredients in energy drinks have on children and adolescents. They also asked the FDA to look into the interactions of caffeine and other energy drink additives and evaluate the safety of caffeine consumption by teenagers.
In October, Monster Beverage was sued by the parents of a teenager who died after drinking two 24-ounce energy drinks within a 24-hour period. The FDA confirmed that it is investigating reports dating back to 2004 about people who had adverse reactions to the drink. The label on Monster Beverage’s drinks state that the drinks are not recommended for children and people who are sensitive to caffeine.
Which stock has a higher P/E: MNST or the $5.70 stock I was talking about with AAPL yesterday, which dominates the fastest growing and largest end market in the history of the planet.
Apple’s trading at 7x next year’s earnings (ex-cash) and MNST is trading at 20x next year’s earnings. Doesn’t mean that MNST will crash or that AAPL will go up tomorrow though.
Easy does it. There’s more panic out there today and I’m scaling into a little bit more long exposure, buying some FIO common and even a little BIDU common.