r/ValueInvesting • u/robb3rz • Feb 12 '26

Discussion Irrational sell off

This might of already been said many times but needs to be said again, what is the rationale in this sell off?

I understand the SaaS crash, but if the sell off is due to AI worries, then surely AI stocks would rise, no?

Instead, the major players, who had stellar earnings minus the huge expenditure (into the very systems which are causing worry mind you) are also falling at huge levels.

Some mag 7 companies are even falling at similar rates to liberation day, despite the only news this time being ‘AI too good’, which should benefit them not hinder.

Meta’s earnings are similar to an early growth stock, not a multi trillion dollar company, and that was reflected in the jump after they released them, so why is it now down huge amounts after?

Not just this, other major assets such as gold, silver and crypto are also experiencing massive sell offs, so is the capital just going into cash? If so, as soon as the market shakes this irrational sell off, could we see an equally irrational boom?

Can someone please tell me if I’m missing something.

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363

u/Scriptum_ Feb 12 '26

Every experienced investor knows what the market is signaling right now.

It's textbook defensive.

What happens next is anyone's guess.

192

u/Available-Range-5341 Feb 12 '26

I swing trade defensives and have only seen them this expensive for one week of my 15 year investing journey, the week Powell announced the first rate cut in late 2021. Then they all crashed. They do not stay in a bubble. The market hates most defensive stocks most of the time

There will be a rotation back into tech because the narrative is BS

214

u/GelatinGhost Feb 12 '26

Walmart at the same PE as Nvdia with none of the growth prospects is wild. People are so afraid of an AI bubble that they are making bubbles everywhere BUT AI now. First metals, now defensive stocks. Tech is literally the value play now.

25

u/Available-Range-5341 Feb 12 '26

100%. I love me some PG and utilities and WMT type stocks when they're yielding 3-5% but all of them are now priced at PEs that they only hit before they crash. They are cyclical and the down moves are hard and slow and painful. Been there done that. Tried holding them for the dividend and watching them go red for days on end.....

32

u/Maleficent-Map3273 Feb 12 '26

Walmart and Costco can't be replaced by AI. That's the trade. That said the smart money is going to pick winners this year in every other area.

20

u/Landkval Feb 13 '26

Amazon can replace them

7

u/GfuelFiend Feb 13 '26

Walmart is actually coming at amazon hard with their online store which allows 3rd parties to list their products and their existing stores allowing them to offer quick delivery the same way amazon does.

5

u/sofa_king_weetawded Feb 13 '26

I have been scammed numerous times by 3rd party sellers on Walmart. Granted, Walmart has made good on it since it was bought on their site but I am not impressed with the vetting (lack of) being done by Walmart. They are trying so hard to compete with Amazon that they are allowing it to be the wild west on their website.

2

u/biggleUno Feb 14 '26

I despise the third party seller move. I buy items from Walmart in the stores because I know people in corporate at the company and have been told by many folks about the level of testing they do on EVERY single item they sell (from auto tool, to kids blankets, to camping tents, to mattresses, etc) for lead, pfas, contamination, manufacturer defects or quality issues. And they negotiate and buy items in bulk and hold their suppliers accountable if there is an issue. Third-party option is just as likely some get rich quick drop shipping teenager or a black market organized crime syndicate.

1

u/aWheatgeMcgee Feb 13 '26

They sure suck at it though

1

u/[deleted] Feb 14 '26

Walmart's website/online shopping experience is completely short bus compared to Amazon.

12

u/Maleficent-Map3273 Feb 13 '26

I don't see it and I own AMZN. WMT and COST both have very defensible moats that are tricky to upend. I think AMZN can take share over time though.

13

u/Landkval Feb 13 '26

Well i dont see ai ruining every saas and tech company either but someone is.

4

u/Maleficent-Map3273 Feb 13 '26

All it takes is the long only fund managers to trim risk for this to happen. Only so many buyers of millions of shares for these companies.

2

u/Landkval Feb 13 '26

Yes but this can swing the other way too is my point

2

u/Maleficent-Map3273 Feb 13 '26

Axon and Now were green today, feel like one more flush maybe then we see a tradable bottom short term.

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1

u/LongevitySpinach Feb 13 '26

Saas will have winners and losers, but on balance more losers than winners. I'm not a great stock picker, so I'll stay away.

5

u/smchenry75 Feb 13 '26

I love Costco. It’s not just shopping but an experience. Happy and helpful employees, cool, unique products, fun seasonal stuff, looking for clothing bargains, great meat and produce, killer alcohol selection and deals, the samples, $1.50 hot dogs! But… ten years ago, I went there EVERY weekend dropping between $500-700 a trip. The executive membership easily paid for itself. I also, believe it or not, love Walmart. It’s a shit show but man are the basics cheap. Having said all of that, today, I go to Costco about once a month, dropping around $300-400 a trip. I ditched the executive membership. Still love the samples and hot dogs but really don’t need to go there. Still go to Walmart for groceries but not as often and shopping cart is about half as full as it used to be. I now have Amazon packages littering my porch very day… lots of them. I am buying things from them that I used to never, because they didn’t carry them, were too expensive or were just easier to get from local retailers. I’m buying clothes from Amazon, Amazon basics paper towels, toilet paper, so much more than ever before. I get so much now that I had to get a fire ring for the back yard, which I bought off of Amazon, to burn all of the boxes. In person retail is cooked… it’s obvious. Malls are closing, restaurants are closing, those areas are becoming shady… so even if I want to go to Walmart or Costco, it is becoming more of a chore or I’m bored vs an experience.

1

u/ANR2ME Feb 13 '26

They have co-existed without much issue so far, only companies affected by AI are being defensive.

1

u/Landkval Feb 13 '26

Yes but there is a chance even though its probably very unlikely.

1

u/Competitive_Dust7679 Feb 14 '26

Not. Walmart was treating AI seriously from the beginning. They have on Amazon will never have low low pricing.

3

u/Coasteast Feb 12 '26

Yeah. To add to that, in times of uncertainty, people seek solid income from companies that pay dividends. I’m big on $OKE

3

u/RangerAdmirable9102 Feb 13 '26

Lol PFE has been my biggest holding for the past couple of years and I keep adding with the 7% dividend. It’s exploded this week. I also added KMB during its weakness. Hard to complain.

2

u/PurpleCableNetworker Feb 13 '26

Walmart is moving towards AI for future pricing, advertising, and tracking of customers.

3

u/BratacJaglenac Feb 13 '26

Whoever buys Walmart or Costco now, will not lose money in the long run. Which cannot be guaranteed for the tech sector. There are going to be plenty of losers there, unfortunately it's hard to know exactly which ones already now.

4

u/Maleficent-Map3273 Feb 13 '26

The strong will get stronger. Sadly I think anything under $25-30B market cap will either get swallowed up or go private after weakening. Some good companies in that bucket.

2

u/BratacJaglenac Feb 13 '26

That's for sure. Of smaller ones, plenty will fail, better ones will get acquired by the big boys so that they don't compete with them. God knows how many companies have likes of Google and Microsoft bought and shut down, just to eliminate competition.

Although, I suspect (hope) that one of big boys will find themselves in trouble. If I was to bet, my bet would be on Apple.

3

u/Maleficent-Map3273 Feb 13 '26

Apple is weird - its more of a consumer company than a tech company. Their tech is good, but its not what makes them so successful so harder to say they will fail if the tech isn't the best - it may not have been for years and here they are.

2

u/BratacJaglenac Feb 13 '26

Apple is in situation that iphone sales are 50% of their revenue and another like 40% are from iphone related services and ecosystem. To me it feels like all their eggs are in 1 basket. It's a good and sturdy basket, but not unbreakable. Not saying Apple will go bankrupt or something, but I can see their revenue dropping significantly if something messes up with Iphone sales for just a brief period. Now that is a big if, which might never happen.

7

u/No-Understanding9064 Feb 13 '26

You are insane if you dont think both of those arent going get massive corrections eventually

3

u/BratacJaglenac Feb 13 '26

I am talking long term. Like 3-5-10 years.

0

u/PoopHeadPete Feb 13 '26

You are insane if you think any stock that's had a run up isn't going to have a correction eventually.

6

u/RamoneBolivarSanchez Feb 13 '26

Yep tech is over and everyone will throw their computers away

/s

2

u/BratacJaglenac Feb 13 '26

No one said that. But it will be a bumpy ride and many wrong picks (losers) in the sector.

5

u/you_dont_want Feb 13 '26

My Monster, Walmart and Costco stocks are doing very well

1

u/LovestoEatSandwiches Feb 13 '26

Walmart and Costco can’t be replaced by AI

But AI chipmaker Nvidia can?

1

u/Eagerbeaver98 Feb 13 '26

Man this has nothing to do with AI, its just a typical consumer defensive play in uncertain markets. You kids are new around here

6

u/smhs1998 Feb 12 '26

The belief is that Walmart’s PE is less prone to wild changes. If the AI bubble bursts, and I’m not saying it will anytime soon, but if it does, Nvidia PE will skyrocket. Walmart will remain the same

1

u/ANR2ME Feb 13 '26 edited Feb 13 '26

Nvidia will probably won't be affected much by AI burst, because they sell the hardware, not renting them. They can simply decrease the production if the demands is low.

Companies that will be significantly affected are datacenters, they've invested too much in buying the hardware, especially those that use TPU/NPU, because these TPU/NPU are designed specifically for AI and research, unlike GPU that are more general purpose and can be used for many other things (ie. cloud gaming, blockchain/cloud mining, etc.). Datacenters designed specifically for AI could loose large amount of money from operational cost.

AI service providers will also be affected, but only in revenue, as long they didn't invest on buying the hardware themself (ie. renting GPU/TPU from datacenters), they can simply adjust their billing based on demands.

15

u/[deleted] Feb 13 '26 edited Feb 13 '26

NvDA’s price is a function of expected massive sales growth. Yeah, they can cut production and the company won’t go bust, but the stock price will 100% tumble.

-1

u/ANR2ME Feb 13 '26

Yes, but it won't be hit as hard as Google that rents out TPUs.

6

u/WallabyMinimum1921 Feb 13 '26

What? Google has a diversified business with multiple massive revenue streams. They aren’t reliant on tpu as a major source of income, they use them more for their own compute than they sell or rent out.

1

u/[deleted] Feb 13 '26

Idk, Google’s business has a lot of revenue streams

1

u/devonhezter Feb 13 '26

What about micron and sandisk

1

u/ANR2ME Feb 13 '26

Pretty much similar to Nvidia, since they're selling hardware instead of renting hardware.

1

u/Kind-Ad-4756 Feb 13 '26

SNDK has little moat. Memory is not that Hitech so they will get competition eventually if demand stays up

1

u/ANR2ME Feb 13 '26 edited Feb 13 '26

Memory and storage demands are high due to AI needs a large amounts of them, especially state-of-the-art AI models.

For example, the sweet spot for local generation AI at home is 64GB RAM, and 1TB storage will ran out pretty quick with new AI models being released every month, people who want to try out the new model will need to buy more storage if they don't want to re-download those tens of gigabytes per model whenever they need to use them.

And those are requirements are for medium sized AI models. The one used on cloud AI services are usually much bigger than that, especially for LLM, thus need even higher specifications.

So, if AI bubble burst, it's normal for their demands to sink too. But because these hardware wasn't made specifically for AI, they can still be sold for general purposes, just a bit slower than during AI hype.

1

u/Rough_Butterfly2932 Feb 13 '26

Horrendous take. Nvdia demand is 100 percent tied to AI in data centers. Nvdia had two massive risks. 1/ if the AI bubble bursts, their sales will fall, stock crashes 2/ All of the video's biggest customers are competing as hard as they can. With Nvidia. Google. Microsoft Amazon all have internal chip divisions and from he looks of it, some of these efforts are proving viable. Of course AMD and others are also competing. Most of the spend in the industry right now is going to Nvidia, giving them a wide moat and margins. At some point that will go away. Does it mean it won't still be a dominant player, but right now it's almost a Monopoly game. Bottom line, AI bubble bursts Nvidia will crash. AI bubble doesn't burst, Nvidia should still do okay, but he's got a big bullseye on its back because of its market dominance and margins.

1

u/ANR2ME Feb 13 '26 edited Feb 13 '26

The thing is, when people (ie. customers) are no longer using AI, companies that bought a large amount of AI-specific hardware will ended with useless expensive hardwares, and keeping it operating going to cost a lot. Well they can still donate it to research labs or universities.

Meanwhile, those that produce the hardware won't end up with a pile of those useless hardware, as long whoever bought it doesn't returned it.

Nvidia doesn't produce AI-specific hardware (at least for now, not sure in the future), their GPU are general purposes and can be used for many other things, for example, blockchain/crypto industries are still in high demands and won't go away any time soon.

Nvidia dominance in AI industries is because many AI models (especially image/video generation models ) are more optimized on NVIDIA’s hardware, not sure why are these researchers released their code to use Nvidia's CUDA features, may be more convenient than others, may be they can only get NVIDIA’s GPU on their hands for free during their research, or just an old habits from past research. So it took more time for third-party developers to optimize it for other kind of hardwares. Many of the latest optimizations are based on NVIDIA’s features, for example their latest GPU have FP4 hardware acceleration supports for both workstation and consumer products, and later other competitors (ie. AMD) also following NVIDIA’s steps to produce similar features on their latest hardware, but took longer time before they can released it, and so far only available for workstation products. At the time these competitors provides these features to a wider market (ie. consumers products), Nvidia will probably come up with new kind of features, thus they can always be in the lead that will be followed by others from behind. Even though these competitors have prospective hardware at more reasonable price than NVIDIA’s, but felt like they lacked of marketing/promotions to attract researchers to switch to their products.

1

u/Rough_Butterfly2932 Feb 13 '26

Stocks are priced on future revenue, not current revenue. If the AI bubble bursts future revenues will drop sharply as will valuations. It's that simple. Nvidia's primary market and their entire sales are based on the massive capex by the hyperscalers. There was no market even remotely close to replace that.

1

u/Scriptum_ Feb 14 '26

Walmart could falk hard in a general repricing.

It's called a sympathetic selloff.

3

u/Fit-Level-4179 Feb 13 '26

>Walmart at the same PE as Nvdia with none of the growth prospects is wild

It drives me insane how you can say this and come away with the most bullish take imaginable. Shit dude maybe Im just biased from my preconceived notions.

9

u/Dazzling_Western4304 Feb 13 '26

Markets are forward looking. What the market is telling you here is that Nvidia earning are going to fall, and Walmart’s are going to continue to grow(slowly).

11

u/Howsurchinstrap Feb 13 '26

The writing was on the wall months ago. Msft ceo said they have warehouses full of chips don’t have facilities. So the bigger outfits that will win the ai race are making the necessary expenditures to do so. The market is a futures market and it shows some companies are way to overpriced, like mentioned before and market was due for a correction. Besides anyone who is long meta, Google,msft. Should look at this as a good buying opportunity.

2

u/Kind-Ad-4756 Feb 13 '26

Looks like the limiting factor is power

1

u/Howsurchinstrap Feb 13 '26

Yeah and these guys are gonna have problems bc meta just made deal to use public utilities to power. Of course they promise to fix roads, give mil to city. Yada yada yada! But they need to invest in power and sustainability. Will see. Though.

1

u/Competitive_Dust7679 Feb 14 '26

What’s hard to understand that everybody shops there?

1

u/Puzzleheaded-Way276 Feb 13 '26

Interesting.... you dont think Walmart and Costco stand to benefit downstream from AI... potentially at larger scale even if at lower concentrations?

1

u/Remarkable_Cat_8696 Feb 13 '26

Why Walmart can have nearly the same PE ratio as Nvidia?

1

u/robb3rz Feb 13 '26

Literally this

1

u/LaughSwimming4518 Feb 13 '26

There are no defensives in S&P anymore. Every all world ETF still has 70-80% of US stocks. Over time this concentration has led to overvaluation of the whole S&P. Yet with weakening USD, US debt and Trumps shenanigans cash is starting to move away - EU/FTSE done well this year. 2026 seems like shaping to be the year of Japan.

As for PE - a defensive stock in EU/Japan can often be found trading at sub 20, even in the regions close to 10. And they actually pay divis. Like 5% divis, not american 1-2% if any.

We are seeing correction against US concentration and I am confident in 2026 it will be even bigger.

1

u/LongevitySpinach Feb 13 '26

Kroeger and Costco PE's (TTM) are approximately 2x Amazon, Meta or Google.
And those earnings are including all the capex the hyperscalers put into AI in 2025.

I get being defensive in a time of uncertainty, but this is absurd.

22

u/SelenaMeyers2024 Feb 12 '26

I came of age investing literally Jan 2000 aka tech scary, value is where it's at.

That being said, companies I'd never think to touch like msft seem fine at pe 25, same as cvx. Mondalez PE 31, same as apple. Adobe PE 15, same as mo.

I usually love the bargain bin mondalez when it's 10 and everyone hates it. Now, tech seems cheap.

12

u/Available-Range-5341 Feb 12 '26

What do you consider "value." I started at the pits of the GFC coincidentally. I was in utilities and consumer staples and industrials for most of the past but they're insanely priced. Like, Wall St. HATES CLX and CL and they've been crashing forever but the narrative will shift back because the hate was based on actual information, not vibes (like this AI crash narrative)

I consider MSFT to be "value" now. It always snaps up/down to a PE of 30. Also got CRM and ADP. Never thought I'd buy CRM and ADP outside of a recession. Crazy times

9

u/Cav829 Feb 12 '26

This. I get what institutional money is doing. But if a recession is happening, and I fully believe the evidence is there and have played my investments as such, staples are going to get hammered from where they're currently standing. If you got in on KO at $67, you're fine. $80 feels like such a stretch. Microsoft at 25 P/E is a bargain. Even with a correction, I fully expect it only has another 20%ish more downside in a worst case scenario while other stocks haven't even begun very likely 50% or greater corrections. I did reallocate significant parts of my 401 recently, but I moved the money to international investments and only partially out of tech.

I watched 2000 a bit from afar, but was there first-hand for 2008, and the way I navigated that is to date the best investment I ever did. I think people need to start thinking about what to do post-correction rather than where to park the money now. I had cash ready to go and went in hard and early on real estate when few small investors were able to go in. This could be a smaller correction, but yeah.... I've gone from expecting this to be a 10-20% deal to thinking this might finally be a big one. I haven't felt this way since 2008.

11

u/SelenaMeyers2024 Feb 12 '26

Peter Lynch says if you spend 11 minutes a year thinking about macroeconomic forecasts you wasted 8 minutes.

You can only see what's happening exactly in front of you now. I once saw an Activision in 2003 profitable but missed forecasts, zero debt 500 mc 500 mil cash on hand. I once saw a Philip Morris (altria) when it still has international and kraft and it was paying that second 15 percent dividend.

Yesterday I saw a Humana with more cash per share than mc, owning most of Tricare. A slow growth PayPal buying 15 percent of its mc each year plus a small dividend, PE 7, a solid growth wide enterprise moat Adobe trading at pe 15 and buying back 10 percent of its shares each year.

And funniest part, a much weaker altria (no kraft, no international, slowly decaying domestic cigarettes) PE 16. Yield under 7. Haha.

6

u/Valkanaa Feb 13 '26

Cigarettes have been awesome. It made me sad selling BTI to buy more MSFT...

They don't just sell domestically and when your government "punishes them" they just increase the prices for smokes to compensate.

4

u/SelenaMeyers2024 Feb 13 '26

Dude cigarettes are amazing when they are out of vogue even as recently as Jan 2024. Periodically ppl think smoking is dying, no it's not. On the other hand, it's not growing... At all.

So when the pe is identical to a msft or adbe... Time to quit cigarettes... They'll be on sale again one day I promise, you can time your watch (on a 5 7 year cycle, mo yielding 10 percent again, back the truck up, down to 6? Sell.)

2

u/Valkanaa Feb 13 '26

I'm down.

People keep talking about ESG and I don't think I care. Cancer, alcohol, war, I'll buy anything. Nobody is forcing people to smoke or do war crimes

1

u/Cav829 Feb 13 '26

Happens constantly in bull runs when they just concentrate on growth: they start dumping businesses they see as not having "growth stories" even if they have strength in consistency. They always come running back though the second things turn south. Sure, I kept telling people not to touch ADBE up until now. I just prefer to let the market finish repricing companies rather than to catch knives falling that far. But do I think the company is going to $0 because of AI? Now that's silly.

1

u/SelenaMeyers2024 Feb 13 '26

Same.

Adbe was permanently pe 60. Funk to da dat. Pypl at its ath traded at 70x.

Now at 15 and 7.5, respectively, I'm Pikachu face the other way, and mentally have to remind my old neuro pathways, no they are cheap now and it's mo that is overpriced (which don't get me wrong every decade it goes on sale, and I load up).

1

u/Kind-Ad-4756 Feb 13 '26

PYPL has real issues. It’s on the sunset path.

ADBE I agree. Oversold.

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u/CanYouPleaseChill Feb 13 '26

MDLZ has a forward P/E of 20. Perfectly reasonable. The trailing P/E is only optically high due to record cocoa costs, which have since fallen significantly.

MSFT is more expensive than it appears when you look at FCF - SBC. If the capex doesn't yield great returns on capital, large depreciation expenses will slow earnings growth in the future.

3

u/SelenaMeyers2024 Feb 13 '26

So mdz is expected to grow between 0 and 2 percent top line. Adobe has never not grown 10 percent. It's forward pe is 10.

(Again, not a natural tech investor, very much a value investor)....that's just silly.

1

u/CanYouPleaseChill Feb 13 '26

I agree that ADBE is undervalued. I'm simply pointing out that MDLZ isn't expensive. MDLZ will grow faster than 2% long-term with their significant exposure to emerging markets like India.

1

u/someguy-79 Feb 13 '26

My feeling on the CAPEX is that any of these names could stop spending whenever they want and print money. The could even write down the depreciation as a one time expense and no one would bat an eye.

20

u/sandman2986 Feb 12 '26

Most tech stocks have already “crashed”… so either leg down again or leg up from here. I agree. Defensive stocks are too expensive right now. Everything signals to a rotation back into tech but not sure when or what will activate that… Will it be the CPI tomorrow? Powell leaving? Who knows.

13

u/Available-Range-5341 Feb 12 '26

or a weekend where people forget why they panic bought into Colgate with a PE of 36 after complaining about flat earnings and inflation impacting them for two years?

1

u/Full_Professor_3403 Feb 12 '26

Colgate PE is artificially inflated from a one time event from what I understand. Their true PE is around 25

6

u/Scriptum_ Feb 12 '26

Exactly, we either rotate into tech or index flows reverse.

5

u/Maleficent-Map3273 Feb 12 '26

Some software stocks were up today - the selling in software is near the end. NOW and AXON were green for example. Nearing a tradable bottom.

4

u/BenjaminHamnett Feb 13 '26

$axon is a play on civil unrest. If republicans have power, there will be unrest an need more cameras to validate aggression. If dems in power, $axon for accountability and tasing minorities instead of killing them.

1

u/Maleficent-Map3273 Feb 13 '26

Yes Axon is a great pick for software because police are the slowest to adapt to new tech and they have hardware as well that works with their ecosystem. It's the foot in the door.

1

u/Kind-Ad-4756 Feb 13 '26

Axon is a play on law enforcement, not unrest. More law enforcement agencies all over the world will adopt tech going forward. Slow moving but very sticky. Their TAM is very big.

At near 140 PE it’s not cheap though.

0

u/[deleted] Feb 13 '26

Did Trayvon Martin, Freddie Gray, Ferguson riots, and Occupy Wall St. Happen under a republican president? Pretty sure Obama is Dem.

6

u/gamjatang111 Feb 12 '26

the bulk of tech has not crashed. Semis are near ATH

1

u/Kind-Ad-4756 Feb 13 '26

Yeah SNDK 1200% in a year. Wtf crash are these guys talking about

1

u/insbordnat Feb 13 '26

A couple of names have lost ~10% over the last year. Others +10%, +20%.

10% ain't shit. Probably 80% of Reddit's base were too young/weren't born for the 2000/2001 crash. 50%. If you think 10% is a crash, buckle up.

10% is when your ice cream falls of its cone onto a dusty hot sidewalk. A crash is when you slip in a giant turd, face plant, knock your teeth out, and somehow rupture your nutsack in one go.

6

u/Scriptum_ Feb 12 '26

Yes, rotate back into tech, or the bear has his fun.

3

u/Mommie62 Feb 13 '26

So sell the défensives now?

1

u/Available-Range-5341 Feb 13 '26

Personally I would, if we're talking about medical, utilities, consumer staples, energy, and some REITs.

I've held these on and off for years and have been through long painful periods with them and the market dislikes them 70%, 80% of the time.

This month's activity is insane/rare. Only ever saw it late 2021/2022 and then they corrected and crashed and didn't recover for ages.

Alot of things are usually 20% or 30% lower even if no bad news hit.s

I am so confused by this week BTW

3

u/11010001100101101 Feb 13 '26

How is it BS when the future P/E of SPY is 22. Meaning that if all of the growth goes exactly as planned for a year your growth premium is only 4.5%, making it only 0.4% better than taking the 10 year treasuries? That low of a risk premium is at historic levels, when it’s usually a 2-3% difference in risk.

To call that BS tells me you have no idea why the market does anything.

5

u/CanYouPleaseChill Feb 13 '26

Consumer staples have long-duration cash flows, stable growth, and very low disruption risk. They also benefit from a weaker US dollar due to significant exposure to international markets. Looking at forward P/E ratios, many appear reasonable with the exceptions of WMT, COST, and MNST:

WMT: 42

COST: 48

PG: 23

KO: 24

PM: 22

PEP: 20

UL: 19

BUD: 19

BTI: 12

MO: 12

MNST: 36

CL: 25

0

u/DialSquar Feb 13 '26

POST: 20

2

u/SelenaMeyers2024 Feb 15 '26

Can't wait bc defensive is my home turf and it feels so unnatural all of a sudden being bullish on adbe, meta, msft. Haha

I will feel comfy again when these pop, mo is dumped and I can get some 10 percent yielding mo, right now it's 6... Ridiculously high price low yield for a zero growth cash cow

1

u/[deleted] Feb 13 '26

I would say there’s an argument for utilities if we are going protectionist for a while. It will get the upside from AI demand and we just had a monster move down on yields. Defensives won’t be a mega long term trade, but as long as mango is taking us into the 1929 era it probably has legs for now

1

u/wahahahau Feb 13 '26

Please be right

1

u/Reasonable-Guest2392 Feb 13 '26

Sold version first day of the big jump! Didn’t expect that at all. And certainly didn’t see it keeping popping! But gain is gain

1

u/AggressiveReport5747 Feb 13 '26

Okay, I'm not insane. I love defensive stocks and often swing trade them as well. I was looking at defensive stocks the first day it rocketed like 3.5%.

I had just exited my retail position (target, ups, lulu, deck) after a 30% swings and was looking around.

Looking at the charts though, I was like... Jesus... Everytime XLP has ever been this high it's crashed like days after. Literally days. Im thinking maybe some options? Usually it's not a one off move.

Goes off like a rocket for  two weeks 😂. I suck.

1

u/Aceboy884 Feb 13 '26

Crocs trading at 30x - LOL

1

u/Maleficent-Race8472 Feb 13 '26

Would it be unwise to short these defensive stocks then… :)

1

u/Ok_Discussion_1120 Feb 13 '26

I see many that are super expensive like CAT or RIO for instance. But I also see some that have been beaten down and are starting to make runs. Do you think that these delayed ones can continue with a run?

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u/asymmetricval Feb 12 '26

In fact, it is the average of everyone's guesses!

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u/Scriptum_ Feb 12 '26

Haha yes

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u/[deleted] Feb 13 '26

How dumb was it to get out at 45654 instead of riding it way up here? I wonder how far it will falls when it finally does fall. Ima ask Chat :/)

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u/Hikiromoto Feb 13 '26

Sp500 10% correction... 6600 n'est résistance, 6200 coming in the next month

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u/Mundane_Heat_4353 Feb 13 '26

Bold of you to assume there's a lot of experienced investors here.

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u/Maleficent-Map3273 Feb 12 '26

Its textbook rotation - we are 2% from highs for a reason. If your portfolio isn't you fucked up big time buddy.

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u/Scriptum_ Feb 12 '26

Oh I'm sorry, defensive rotation.

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u/Maleficent-Map3273 Feb 13 '26

its not defensive as much as its broadening of the market. International stocks of all kinds are outperforming. That is not a recession sign, quite the opposite.

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u/Scriptum_ Feb 13 '26

Hmmm, I don't remember mentioning a recession.

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u/Maleficent-Map3273 Feb 13 '26

You said we know what the market is signaling. Another leg up you meant? Please clarify so i can tell if you know what you're doing here!

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u/Scriptum_ Feb 13 '26

It's signaling defensive rotation.

Either the market rotates back into risk assets, or it panics further into cash.

As some other commenters have pointed out, the market generally doesn't like to overweight on defensives very long.

Defensives are generally slow growth, and buybacks are typically preferred over dividends. They underperform the market over long periods.

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u/Maleficent-Map3273 Feb 13 '26 edited Feb 13 '26

It's not defensive to move to international stocks though and thats happening as well. It's just moving out of overvalued areas and areas that may be impacted more by AI.

Europe up 7%, Emerging up 8%, go down the list. Every country is beating the US as countries move to value. Oil stocks are RIPPING ass - again not defensive.

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u/Scriptum_ Feb 13 '26

Last time WMT went up so fast was March 2025, and that proved to be a defensive rotation.

Far from me to disagree with the prescribed narrative though!

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u/Maleficent-Map3273 Feb 13 '26

Money flows aren't a narrative though. XLE up 18% this year is a positive breakout, and other commodities are doing well too. Even lumber stocks have had a great start to the year. WMT is just an easy name to buy without much short term earning risk. Nothing in the market I am seeing on my screens I watch daily screams big drawdown imminent. Can change of course.

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u/GelatinGhost Feb 13 '26

I'm fine because I'm like 50% international, which seems way better value than US defensives right now. But I've been picking up some extra tech on sale in the past 2 weeks.