According to GuruFocus Baskets statistics, the top-four stocks in the "Not Interested" virtual basket as of Monday are Tesla Inc. (TSLA, Financial), Apple Inc. (AAPL, Financial), Netflix Inc. (NFLX, Financial) and Amazon.com Inc. (AMZN, Financial).
The GuruFocus Baskets feature follows Berkshire Hathaway Inc. (BRK.A, Financial)(BRK.B, Financial) co-managers Warren Buffett (Trades, Portfolio) and Charlie Munger (Trades, Portfolio)'s theory of achieving higher returns by investing only within one's "circle of competence." Munger added that Berkshire "has three baskets for investing: yes, no, and too hard to understand."
GuruFocus users can place a stock into one of four virtual baskets: buying the stock, considering buying shares, researching the stock as a potential investment, or marking the stock as not interested. In previous articles, we discussed the top stocks that GuruFocus users are buying or considering buying. However, we also have a "not interested" virtual basket: An investor may dismiss the stock as a potential investment if the stock is too hard to understand or if the stock is too expensive.
Tesla enters S&P 500 index but skids ahead of Christmas holiday
Tesla is the most-popular stock in the "not interested" virtual basket with 32 votes from GuruFocus users.
Shares of Tesla skidded on the stock's first day as a member of the Standard & Poor's 500 index, trading below more than 5% from last Friday's all-time-high close of $695. Despite this, the stock's valuation remains "off the charts": The stock's share price is almost six times greater than the fair value based on GuruFocus' own valuation measure.
According to GuruFocus, Tesla's price valuations underperform over 90% of global competitors, suggesting significant overvaluation. Nonetheless, the Palo Alto, California-based electric vehicle giant has a high Piotroski F-score of 8 and a strong Altman Z-score of 14.5, suggesting good financial strength.
Gurus unfazed by Tesla's high valuation include Ron Baron (Trades, Portfolio)'s Baron Funds, Philippe Laffont (Trades, Portfolio)'s Coatue Management and Spiros Segalas (Trades, Portfolio)' Harbor Capital Appreciation Fund.
Apple
Twelve GuruFocus users dismissed Apple as a potential investment despite 31 users buying shares and 17 users considering buying shares.
Shares of Apple traded around $125, down over 1% from the previous close of $126.66. The stock is significantly overvalued based on its price-to-GF-Value ratio of 1.93.
GuruFocus ranks the Cupertino, California-based tech giant's profitability 9 out of 10 on several positive investing signs, which include a high Piotroski F-score of 7, consistent revenue growth, and an operating margin that is outperforming over 95% of global competitors despite declining approximately 4.3% per year on average over the past five years.
Despite high profitability, Apple's valuation ranks 1 out of 10 on several signs of overvaluation, including price-book and price-sales ratios near 10-year highs and underperforming over 90% of global competitors.
Gurus riding Apple's high profitability include Berkshire and Ken Fisher (Trades, Portfolio)'s Fischer Investments.
Netflix
Nine GuruFocus users dismissed Netflix as a potential investment.
GuruFocus ranks the Los Gatos, California-based streaming giant's profitability 9 out of 10 driven on a 4.5-star business predictability rank and an operating margin that has increased approximately 18% per year on average over the past five years and is outperforming over 87% of global competitors.
Despite high profitability and a price-to-GF-Value ratio of 0.99, Netflix's valuation ranks 1 out of 10 on the back of price valuations underperforming over 90% of global competitors. While the GF Value measure suggests that the company's stock price is fairly valued, Netflix is still considered overvalued compared to its competitors and historical valuations.
Amazon
Six GuruFocus users dismissed Amazon as a potential investment.
GuruFocus ranks the Seattle-based e-commerce giant's profitability 8 out of 10 driven on a 4.5-star business predictability rank and an operating margin that is near a 10-year high of 5.72% and outperforming approximately 70% of global competitors.
Although the stock is fairly valued based on the GF Value measure, Amazon's valuation ranks 1 out of 10 on the back of price valuations underperforming over 90% of global competitors.
Disclosure: The author is long Apple. The mention of stocks in this article are for statistical purposes only and do not constitute a recommendation to buy or not buy a stock. Investors must do their own research before making investing decisions.
Read more here:
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- 4 Modestly Undervalued Stalwarts as of December
- 5 High-Quality Stocks in the Mediterranean
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