The company said it had reached an agreement to sell $10 billion of stock to Berkshire Hathaway, deepening one of the Omaha, Neb.-based holding company’s few big-tech investments. Alphabet plans to issue another $70 billion by various means this year.
Alphabet said the proceeds would be used to finance data-center expansion and secure computing capacity needed to train and run AI models. The company earlier this year said that its 2026 capital expenditures were expected to be as much as $190 billion and that it expects capital expenditures next year to significantly increase by comparison.
Surprised that Berkshire would invest in this, but also surprised that Google’s cash flow apparently isn’t sufficient to finance the buildout and that they issue equity instead …
Well, after consulting FASTgraphs, maybe I shouldn’t be surprised. GOOG FCF:
No saASS trading by me, but today I exchanged some more money (BND) for more pizza (DPZ), packaged foods & meat (GIS) and tractor supplies (TSCO). This turned about $300 of fixed income into about $300 of dividends.
Since TSCO tanked over 4% today I also sold a TSCO 27P JAN27 for a couple hundred bucks. If I get assigned, fine (my average entry price so far is $30.65). If not, I will realize an annualized 16.36% return on the $2700 of capital at risk if I hold until expiry. Most likely (according to experience) I’ll buy the put back early.
True true … for my investment style only mostly true, though, I would claim. Or maybe I didn’t understand your remark about risk.
On some days, the fear factor is a bit higher than usual and I am happy to issue expensive insurance that just spiked in price to those who apparently need it to hedge their … ahem, risk of TSCO falling below $27 by next year.
For just $275 I underwrote to the buyer of that insurance that I’ll take care of 100 of their TSCO shares if they want to sell it to me for $27 before Jan 15 2027. The exact same insurance contract cost about $50 or $60 just a month or two ago.
Once we’ve sailed around Cape Fear in a couple of months or half a year, the price of this insurance will likely plummet again (with likely more turbulence in between). If the price of the insurance does not plummet by Jan 15 2027, I am happy with the “risk” of getting assigned 100 TSCO shares at $27. In fact, I just bought a bunch lot of TSCO at over $30 …
Think of it this way:
with buying TSCO now at over $30 I expect to be getting hard cash flow (dividends) of about 3%. $3000 at risk to receive $90 in hard cash over a year (hopefully)
with today selling TSCO 27P JAN27 I get $275 up-front for $2700 at risk for about 230 days, which means an annualized 16% return on the capital at risk.
This of course doesn’t always work out as planned, but it has worked out most of the time since I have sold options.
I also acknowledge that our investment styles are different, that you focus more on the upside which could be capped with my approach, that you are also looking for capital gains (market dividends as you call them) that I’m not really interested in (happy if they arrive, of course), that capital locked up in securing the “Cash” Secured Puts only generates roughly “Fed rate” returns[%] and that I am going to miss out on having instead put cash into rocket stock SPCX that will be a 100 bagger in the same time, possibly (jk).
Anyway, just a different investment style. All styles are fine. The best ones are those that (a) generate returns and (b) you can stick with.
I am sure you understand all of this. I wanted to explain my thinking to those perhaps less familiar with selling options.
Optionality: sorry, don’t want to criticize, just some thoughts:
Selling Options is exactly this, you lose options.
Once-in-a-lifetime is enough to blow away all those little gains.
Long puts is the only option play “allowed” by the taxman in Kreisschreiben 36. To secure your portfolio you need more or less half of the worth in puts, as the premium changes too.
Options have low liquidity, terrible spreads; you need quite some gain just to cover that.
In addition to the risk of losing money you have the risk of missed opportunities.
As I understand, goofy likes options just as little playing objects, no big and risky position sizes. I stick to the basics, long stocks.
Man, just yesterday my principal return on AVGO was my first tenbagger in my dividend growth portfolio in less than four years – today it drops 15% or so …
Can’t even write a Put on this thing … it might go down 50% more if when the AI bubble deflates eventually.
It’s anyway not that relevant for my dividend income, but it’s always exciting when a company in my stock picked portfolio is suddenly worth 20% less (or more) within minutes of trading. The Efficient Market doing its thing, I guess …
Overall portfolio is of course up today, as every sector other than Tech is having a field day.
Of course, IMHO, go ahead. I’m not a moderator, nor did I start the topic, so my opinion doesn’t count anyways. I’m just a dog in a (platonic) liaison with Minnie …
Even broader than ETFs, portfolio-level conversation. Regardless, it’s a good month this one, double divvies from VWRL and also SCHD (which has done really well!).
CHDVD has had pretty meh going this YTD, but my mental accountant had a few drams of rums with Pete’s captain and has decided to consider it my emergency fund when I get to 100 shares.
@cubanpete should probably decide since he started the topic.
I’m on two minds:
when I started the stock picking topic on a different forum, I didn’t want the ETF investors to chime in because … well, I feared it would become a repeat of the rest of the investment discussions there, i.e. fundamental ETF evangelists repeating their belief system that anything else but investing in ETFs is futile.
I’m not opposed to discussing the merits of “strict” ETFs (i.e. with mechanical inclusion criteria).
Maybe discuss them but limit citations to the Modern Portfolio Theory to less than 100 citations per post?[1][2]
1 Never mind …
2 Ok, ok, I admit I am the lonely wolf dog doing citations anyhow.
I’d suggest opening a new topic: “ETFs and especially VT investing (or are there any stupid people thinking otherwise???”
More seriously, let’s wait what @cubanpete thinks. He and I seem to dominate this topic anyhow, and if any VT lovers want to overtake the topic, we’ll … um … er … just move to a different forum.
I have absolutely nothing against discussions on ETF or any other financial theme.
It may seem that I am against ETF but I actually think for most people ETF are just about the best they can do. I even recommended to a friend a combination of two ETF and a REIT to be levelled out every 7 months.
But choosing an ETF is not an easy task. There are more stock indices than stocks (!) and many of those indices have more than one ETF following them.
So the most important choice is what index to follow. I recommend mechanically constructed indices like the U.S. Dividend 100 (SCHD) or the Nasdaq 100 (which just changed it’s rules what I really don’t like). I would not recommend to follow the SP500 as it is more like a (badly) managed fund. And of course I would never invest in one of those all-world thingies that contain thousands of stocks where you probably have only Cents invested and that have a lot of rubbish and still do have really big positions because of market-cap weighting.
