Time to CASH OUT! 4 Stocks I Would NOT Own Right Now
Summary
Couch Investor introduces a unique framework of four distinct buckets for classifying stocks, moving beyond the traditional search for winners to encompass strategies for managing underperforming assets and understanding market dynamics. This approach helps investors identify whether a stock represents opportunity cost, dead money, is expensive relative to its execution, or is simply overvalued with overly high expectations. He stresses that while finding winners is crucial, knowing when to cut losses or reallocate capital from underperforming or excessively priced assets is equally important. The current market, heavily focused on AI and semiconductors, often "shoots first and asks questions later," leading to situations where quality businesses are overlooked or overvalued.
This category includes companies that, while potentially still growing, do not offer the best return for capital due to high valuations.
This bucket encompasses "slow SAS" companies that might still be great and profitable businesses but face challenges like AI disruption and slower growth compared to their past performance.
This category targets "strong SAS" companies and others where execution is solid, but the market premium is too high, or better alternatives offer similar execution for a lower price or faster growth.
This bucket includes super high-quality businesses that are, however, extremely expensive, with expectations already priced in for years of future execution.
Finally, Couch Investor discusses **Grab** as a quality business experiencing opportunity cost due to investor expectation mismatches or market misunderstanding. Despite "3 years of nothing" in stock performance, he notes it's growing at 20% year-over-year, not expensive, and has strong execution. He suggests "buying it at $3.50 could be a very good deal" for those who understand its long-term potential to dominate Southeast Asia and become a $100 billion company, cautioning against focusing solely on the small share price.
Mentioned Stocks
Reasoning: Couch Investor discusses Nike as a 'strong brand' and a 'turnaround story,' but highlights recent quarters with 'no growth' and questions its actual cheapness. He suggests it could be 'dead money' if the turnaround fails, especially when faster-growing alternatives are available.
Reasoning: Couch Investor, who previously owned Rocket Lab, criticizes its valuation, stating that 'trading at 50 times sales or whatever is not normal.' He labels it as 'expensive' and 'overvalued,' arguing that it is 'paying for years and years of future execution.'
Reasoning: Couch Investor places Salesforce in the 'Dead Money Risk, Thesis Deterioration, Opportunity Cost' bucket, describing it as a growing and profitable business. However, he notes its significant stock decline over the past five years (around 31% down) and suggests that the multiple, AI disruption, and slower growth make it a dead money risk, despite no revenue decline.
Reasoning: Couch Investor initially mentions Palantir as an 'extreme case' that could fit Bucket 1 but notes it's 'accelerating across the board' and 'growing into the valuation.' He then places it in Bucket 4, describing it as a 'super high quality business' but 'very expensive' with high expectations. He suggests that if you already own these names, it's not a reason to sell unless growth decelerates significantly.
Reasoning: Couch Investor includes ServiceNow in the 'Might Be Dead Money, Expensive Relative to Execution, Better Alternatives Exist' bucket. He acknowledges it as a 'great business' with execution, but stresses it's 'trading at a high premium' and implies that for the price paid, better alternatives or more efficient capital allocation might exist.
Reasoning: Couch Investor describes PayPal as a 'failure' of a turnaround story. Despite being 'extremely undervalued' on paper, with management promising a turnaround, actual execution was 'quite trash' and management's narrative 'a load of BS.' He implicitly regrets his past bullish stance and advises caution.
Reasoning: Couch Investor places Shopify in the 'Might Be Dead Money, Expensive Relative to Execution, Better Alternatives Exist' bucket. He describes it as a 'great business' with execution, but notes it has seen a 'big decline' and implies that if bought at a 'super high price,' it could be 'dead money' due to overvaluation.
Reasoning: Couch Investor includes Arm Holdings in Bucket 4 ('Overvalued, Opportunity Cost, Expectations Are Too High'), describing it as a 'prime example' of a high-quality business that is 'very expensive' with high expectations. Similar to CrowdStrike, he suggests that existing owners shouldn't necessarily sell unless core business metrics decline.
Reasoning: Couch Investor mentions playing Intel's turnaround story in the past, noting it 'took way too long, but it happened.' He acknowledges that the current valuation 'makes zero sense' for today's business but believes the company could 'grow into that valuation pretty well pretty quickly over the next two years' if it continues in the right direction.
Reasoning: Similar to Salesforce, Couch Investor places Adobe in the 'Dead Money Risk, Thesis Deterioration, Opportunity Cost' bucket. He describes it as a very profitable and growing business but highlights slower growth, high multiples, and potential AI disruption as factors contributing to dead money risk and opportunity cost.
Reasoning: Couch Investor includes Axon in the 'Might Be Dead Money, Expensive Relative to Execution, Better Alternatives Exist' bucket. He describes it as a 'great business' where execution is present, but it has seen a 'big decline,' indicating that a high purchase price could have made it 'dead money' due to overvaluation.
Reasoning: Couch Investor includes Apple in the 'Opportunity Cost, Valuation Disconnect, Slowing Narrative Clarity' bucket. While acknowledging it as a very profitable and growing company, he implies its current price makes it a less optimal allocation of capital, similar to Tesla.
Reasoning: Couch Investor includes Snowflake in the 'Might Be Dead Money, Expensive Relative to Execution, Better Alternatives Exist' bucket, noting its 'reacceleration or acceleration in growth.' Despite this, the bucket implies it may still be expensive relative to its execution, or better alternatives exist for the price.
Reasoning: Couch Investor places Tesla in the 'Opportunity Cost, Valuation Disconnect, Slowing Narrative Clarity' bucket, questioning if it's the best place for capital due to its high forward price-to-earnings ratio of 188 times, despite being a growing company.
Reasoning: Couch Investor places CrowdStrike in Bucket 4 ('Overvalued, Opportunity Cost, Expectations Are Too High'), calling it a 'super high quality business' but stressing it's 'very expensive' with high expectations. He advises that for existing owners, it's not a reason to sell unless growth decelerates or margins come down.
Reasoning: Couch Investor places Datadog in the 'Might Be Dead Money, Expensive Relative to Execution, Better Alternatives Exist' bucket. He identifies it as a 'great business' with execution, but, like ServiceNow, points out its 'high premium' and the possibility of finding similar execution or growth at a better price elsewhere.
Reasoning: Couch Investor mentions ASpace Mobile in Bucket 4, noting it's 'worth tens of billions of dollars barely generating any revenue right now doesn't make any sense.' He implies its valuation is illogical and prone to crashes if timelines change or expectations are missed.
Reasoning: Couch Investor implicitly recommends On Holdings as a faster-growing alternative to Nike. He states that an investor would be 'getting a bit of the same business just growing much faster than a Nike,' making it a potentially better choice for growth-oriented investors.
Reasoning: Couch Investor discusses Grab as a quality business currently around $3.60 per share, a $14.6 billion company. He notes it's 'probably not expensive,' has execution, and is 'still 20% year-over-year growth.' He suggests 'buying it at $3.50 could be a very good deal' for those who understand its long-term potential to dominate Southeast Asia and become a $100 billion company, despite its stock having done 'nothing' for three years due to market focus on AI or expectation mismatches.