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Welcome to Episode #337 of the Value Investor Podcast.
Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.
On July 24, 2023, Stocktwits sent out a tweet with a list of the 10 best performing S&P 500 stocks since 2000. The names on the list weren’t necessarily what you might think. While 2 of the “Magnificent 7” were on the list, that meant the others were not.
The list reflected the last 23 years. That’s a long time to hold, and compound, a stock. Compounding is usually associated with value investors, like Warren Buffett, because it’s value investors which are normally long-term investors.
But what about valuation? None of the Magnificent 7 are cheap.
Should you buy a company at any price if you intend to hold it for a long time? Some on Twitter have argued that valuation is irrelevant. Look at Visa and Costco. Neither have been cheap but they have been good long-term performers.
Investors might be surprised to see Tractor Supply as the third best performer in the S&P 500 since 2000. Since Jan 4, 2000 to July 24, 2023, Tractor Supply is up 18,980%.
Earnings of Tractor Supply are expected to rise 7% in 2023 and 10% in 2024. You’re not getting the shares dirt cheap today, however, as it has a forward P/E of 20.5. And with that earnings growth, it has a PEG of 2.3.
Should Tractor Supply still be on the value investor’s shortlist?
Ansys is a software company that specializes in engineering simulation. Ansys didn’t join the S&P 500 until 2017 but it is now the 8th best performing S&P 500 stock since 2000. From Jan 4, 2000 to July 24, 2023, Ansys is up 13,162%.
Earnings of Ansys are expected to rise 7.6% in 2023 and 11.6% in 2024. But you’ll pay a high price for those earnings as it has a forward P/E of 40 and a PEG ratio of 8.
Is it too late for value investors to get into Ansys?
Visa did not make the S&P 500 best performers list. It went IPO in 2008 and shares are up 1,363% during that time.
Earnings of Visa are expected to jump 15.2% in fiscal 2023 and another 12.8% in fiscal 2024. Shares have always been expensive. At the IPO, it was trading at 40x and in 2021, when shares hit new highs, it was trading at 51x. But it’s gotten cheaper. Visa currently trades with a forward P/E of 27 and a PEG of 1.8.
Costco didn’t make the S&P 500 best performers list either, even though it’s a fan favorite both of shoppers and investors. Shares of Costco are up 1,052% from Jan 4, 2000 to July 24, 2023.
Earnings of Costco are expected to rise 9.7% in fiscal 2023 and another 6.9% in fiscal 2024. But is that good enough? Costco is expensive, with a forward P/E of 39.2 and a PEG ratio of 4.7.
For value investors, is it time to concede you will never own Costco?
Chipotle Mexican Grill also did not make the list of the top 10 best performing S&P 500 stocks. It went IPO in Jan 2006 and promptly rose 100% on its first day of trading. Chipotle hasn’t been a cheap stock since. Shares of Chipotle are up 4,404% since the IPO.
Earnings of Chipotle are expected to soar 34.5% in 2023 and rise another 20% in 2024. Shares have come down off recent all-time highs so it’s PEG ratio is just 1.3. That looks more attractive than its forward P/E, which is 42.7.
If Chipotle shares weaken further, will value investors take a look?
What Else Do You Need to Know About Long-Term Investing and Compounding?
Tune into this week’s podcast to find out.
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How Value Investors can use the Power of Compounding
Welcome to Episode #337 of the Value Investor Podcast.
Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.
On July 24, 2023, Stocktwits sent out a tweet with a list of the 10 best performing S&P 500 stocks since 2000. The names on the list weren’t necessarily what you might think. While 2 of the “Magnificent 7” were on the list, that meant the others were not.
The list reflected the last 23 years. That’s a long time to hold, and compound, a stock. Compounding is usually associated with value investors, like Warren Buffett, because it’s value investors which are normally long-term investors.
But what about valuation? None of the Magnificent 7 are cheap.
Should you buy a company at any price if you intend to hold it for a long time? Some on Twitter have argued that valuation is irrelevant. Look at Visa and Costco. Neither have been cheap but they have been good long-term performers.
Does Valuation Matter in Long-Term Investing?
1. Tractor Supply Co. (TSCO - Free Report)
Investors might be surprised to see Tractor Supply as the third best performer in the S&P 500 since 2000. Since Jan 4, 2000 to July 24, 2023, Tractor Supply is up 18,980%.
Earnings of Tractor Supply are expected to rise 7% in 2023 and 10% in 2024. You’re not getting the shares dirt cheap today, however, as it has a forward P/E of 20.5. And with that earnings growth, it has a PEG of 2.3.
Should Tractor Supply still be on the value investor’s shortlist?
2. Ansys Inc. (ANSS - Free Report)
Ansys is a software company that specializes in engineering simulation. Ansys didn’t join the S&P 500 until 2017 but it is now the 8th best performing S&P 500 stock since 2000. From Jan 4, 2000 to July 24, 2023, Ansys is up 13,162%.
Earnings of Ansys are expected to rise 7.6% in 2023 and 11.6% in 2024. But you’ll pay a high price for those earnings as it has a forward P/E of 40 and a PEG ratio of 8.
Is it too late for value investors to get into Ansys?
3. Visa Inc. (V - Free Report)
Visa did not make the S&P 500 best performers list. It went IPO in 2008 and shares are up 1,363% during that time.
Earnings of Visa are expected to jump 15.2% in fiscal 2023 and another 12.8% in fiscal 2024. Shares have always been expensive. At the IPO, it was trading at 40x and in 2021, when shares hit new highs, it was trading at 51x. But it’s gotten cheaper. Visa currently trades with a forward P/E of 27 and a PEG of 1.8.
Should value investors keep an eye on Visa?
4. Costco Wholesale Corp. (COST - Free Report)
Costco didn’t make the S&P 500 best performers list either, even though it’s a fan favorite both of shoppers and investors. Shares of Costco are up 1,052% from Jan 4, 2000 to July 24, 2023.
Earnings of Costco are expected to rise 9.7% in fiscal 2023 and another 6.9% in fiscal 2024. But is that good enough? Costco is expensive, with a forward P/E of 39.2 and a PEG ratio of 4.7.
For value investors, is it time to concede you will never own Costco?
5. Chipotle Mexican Grill (CMG - Free Report)
Chipotle Mexican Grill also did not make the list of the top 10 best performing S&P 500 stocks. It went IPO in Jan 2006 and promptly rose 100% on its first day of trading. Chipotle hasn’t been a cheap stock since. Shares of Chipotle are up 4,404% since the IPO.
Earnings of Chipotle are expected to soar 34.5% in 2023 and rise another 20% in 2024. Shares have come down off recent all-time highs so it’s PEG ratio is just 1.3. That looks more attractive than its forward P/E, which is 42.7.
If Chipotle shares weaken further, will value investors take a look?
What Else Do You Need to Know About Long-Term Investing and Compounding?
Tune into this week’s podcast to find out.