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okay so Quran that brings us to cyclicals and cyclicals I think it's pretty much like there some some years they have their businesses are strong and then other years demand for their products or Services goes down and it's a cycle and uh media companies come to mind auto companies come to mind to some extent oil and gas companies come to mind and um the thing I wrote down there uh the current PE doesn't matter tomorrow matters um what what I mean by that is like when I go out there and I look at stalantis right now the company that makes Jeep and RAM they have I think they have a lot of net cash on their um on their books and if you look at what they earn like in the last six months or last year and then you take away that cash even though they're going to use that to go into electrification probably but the point is you can make an argument they're somewhere close to like a PE of one or PE of two right now like right now and I've been somewhat tempted by that but I know the Auto industry is cyclical and I think we've seen this at some of us have seen this thing some of us might be familiar with Porsche and VW where if you account for the value of Porsche inside of ew VW might look extremely cheap like zero dollars or something like that but and one might ask themselves well why is the market pricing stalantis and uh VW so cheap it's because these cyclicals it doesn't matter if they're cheap today it matters what the demand for the cars they sell is going to be two years from now three years from now and kind of where we're at um in the cycle so Quran what do you what do you think of uh cyclicals and what do you what do you kind of look out there with a risk factor this is pretty much where peterlin says that a lot of the stock Pickers tend to get there you know then to lose money because they think that the citrical stocks are a lot like the strollers right so they hear these big names and they're like okay yeah these are Dependable businesses just price and accurately by the market if I get in this at the right time I can make a lot of money here uh not naturally like the valuation metrics can be very misleading like you've talked about and I also remember that Tom mentioning something like uh you know with citricals you should buy at Book value and then sell at the when the PE seems cheap like that's kind of the good time to kind of go with cyclical so these are not stocks that you can hold for the long term you kind of make your return exit when you think that you know the market is going to start pricing them in a rich way and then just get out yeah these are these are dangerous because you look at steel companies in the last couple years and you you think like okay they're at peas of like one or two and I can make back my money in one or two years and then figure out what to do then but then if demand for steel or the price of steel changes um I I was looking at shipping in the last year and I was briefly in that business but that business is so tough because the rates can change dramatically and that means our earnings go down a ton and not only that but the book value that you buy against the value of the ships themselves can change dramatically as the prices for the shipping uh come down so as far as cyclical goes like I don't I'm not going to find myself in them a lot but I think there's definitely opportunities there but man you two things have to be in place one they have to be extremely cheap uh to lower the risk and then two you've got to know where you're at in the cycle and that comes down to circle of competence and if you don't know where you're at in the cycle you can really get into trouble because like with the stall works if I buy uh Coca-Cola at a PE of 25 instead of a PE of 19.
I'm not going to get in that much trouble like over the long run they'll kind of grow out of that and even in the short run I'm not going to lose that much money but you really can get uh in trouble with with the cyclical so that was my my main takeaway from that section was just like remembering how kind of risky they are if you don't know what you're doing and it's definitely not for the new investors someone who's just starting out like best to focus on the first three categories you got your slow Growers Star Wars and fast Growers you can make like plenty of money over there cyclicals like once you're a bit more experienced a little more seasoned maybe you can get into that at that point foreign
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