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DD Digest: Absurd Numbers & Embarrassing Returns

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DD Digest: Absurd Numbers & Embarrassing Returns

A quick fix of the latest financial happenings.

Carter Kilmann
Jun 24, 2022
6
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DD Digest: Absurd Numbers & Embarrassing Returns

www.stockduediligence.com

Good morning, investors!

If this is your first time with us, don’t forget to subscribe here. If you enjoy today’s issue, please hit the heart button at the end of the report.

Free stock research

Without further ado…


One Pretty Absurd Graph of Scary-High Home Prices

Two years ago, we were all forced indoors for an indeterminate amount of time.

One year ago, people realized they needed more space and started buying homes at a feverish pace.

This year, average home sales prices eclipsed $500,000 for the first time ever. Couple that with rising interest rates, and you have what appears to be an untenable position for the housing market. 

For fun, let’s look at what it would take for the typical American to buy a house right now. Assuming averages across the board, here are our assumptions: 

  • House price: $507,800 — the average according to the Fed at the end of Q1

  • Down payment: $66,014 — based on the median down payment of 13%

  • Mortgage: $441,786  — which we will assume is a 30-year fixed

  • Interest rate: 5.81% — the weekly average according to Freddie Mac

And the financial toll excluding taxes, fees, insurance, maintenance, and so on: 

  • Monthly payment: $2,595 

  • Monthly gross income: $4,120

That’s 63% of the typical individual’s GROSS income. Yikes.


Two Tech Stocks That Have Yielded Embarrassing Returns

If you invested $10,000 in Facebook five years ago and held your shares, you’d have a whopping…

$10,515, good for a 5.2% return.

What’s sadder, that figure was only 3.2% entering today. 

Obviously, the stock market is off to a historically rough start in 2022, and Facebook has faced its fair share of issues over the last six months, but just look at their five-year growth. 

Revenue: up 190%. Net income: up 147%.

Would you have guessed this level of operating growth would yield practically nothing for long-term shareholders?

Dropbox, the cloud storage software that’s handy when you need to share oversized files, has experienced a similar level of stagnation. In March 2018, Dropbox priced its IPO at $21 per share. Yesterday, it closed at $21.84. 

Let’s look at how the company has grown:

Cloud is a competitive industry, but you’d think a company that almost doubled its revenue, steadily improved margins, and finally made a profit would generate better than a 4% return. 


Three Eye-Opening Tweets

As always, we close with three eye-opening tweets:

The missed opportunities with streaming-only titles. 

I love this visual comparison and thread by Wasteland Capital. By the end of my investment banking days, my portfolio consisted primarily of film and TV companies, and I always thought Netflix did itself a disservice by limiting its titles to its own platform versus releasing them in theaters initially.

Movie theater attendance and box office revenue are way down from pre-pandemic days, but it’s still a multi-billion dollar industry. Some believe this could finally be the year Netflix relents and inks an agreement with film exhibitors. 

Twitter avatar for @ecommerceshares
Wasteland Capital @ecommerceshares
$NFLX spent $150m on “Spiderhead”, while $PARA spent $150m on “TopGun: Maverick”. When Maverick goes to streaming on Paramount+, it will have grossed over $1.1bn worldwide. “Spiderhead” will have grossed… $ zero. Who do you think has better streaming economics?
Image
4:17 PM ∙ Jun 23, 2022
282Likes26Retweets

Rising rates and housing prices = bad time to buy a home

Twitter avatar for @buccocapital
Bucco “Buyback” Capital @buccocapital
Incredibly abrupt increase in % of consumers who think now is a bad time to buy a home Seems…not great
Image
11:26 PM ∙ Jun 20, 2022
150Likes12Retweets

When inflation is so high that you need an installment loan to buy a sandwich.

Twitter avatar for @matt_slotnick
Matt Slotnick (has a v good CRM to sell you) @matt_slotnick
welcome to summer 2022, it's time to BNPL a $19 sandwich
Image
4:16 PM ∙ Jun 20, 2022
2,966Likes246Retweets

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