Prudence in a Gilded Age

The recent ascent of the Dow Jones Industrial Average, the S&P 500, and the Nasdaq Composite has been, shall we say, enthusiastic. A 13%, 16%, and 20% gain respectively, culminating in a succession of record highs. One might almost believe prosperity is a perpetual state, a delusion history consistently corrects. Yet, as the market reaches for the heavens, valuations have followed, with an impudence that would shame a debutante. The Shiller P/E ratio, that most sober of indicators, now stands at a multiple of 40.65, a figure surpassed only once in the annals of financial history – a circumstance that suggests either unprecedented genius or, more likely, a collective lapse in judgment.

To surpass a Shiller P/E of 30, one discovers, is to flirt with disaster. Historical precedent, a tiresome but reliable companion, reveals that such heights have invariably been followed by corrections – declines ranging from a mere 20% to a rather dramatic 89%. One might observe that the market possesses a peculiar fondness for self-inflicted wounds. Still, to declare oneself entirely bereft of opportunity amidst such extravagance would be a display of poor taste. Bargains, like rare orchids, merely require a more discerning eye to unearth.

Thus, we present three equities – not merely ‘safe,’ a term so dreadfully pedestrian, but possessing a resilience that suggests a limited downside – suitable for the discerning investor navigating this particularly gilded age.

NextEra Energy

Our first selection, NextEra Energy, is a utility, and therefore, blessedly immune to the whims of fashion. To invest in a provider of electricity is to invest in the very necessities of modern life – a far more reliable proposition than chasing the ephemeral promises of technological novelty. Whether one resides in a grand estate or a modest flat, the demand for illumination remains stubbornly consistent. Such predictability, my dear reader, is a balm to the soul – and a boon to the balance sheet.

The barriers to entry in this sector are, naturally, formidable. Laying the infrastructure for power distribution requires not only capital but also a degree of foresight rarely found in the modern financier. NextEra, furthermore, has demonstrated an admirable commitment to renewable energy, a pursuit both virtuous and, increasingly, profitable. Their investments in wind and solar power have not only reduced costs but have also positioned them at the forefront of a necessary transition. One might say they are not merely providing electricity but shaping the future.

And, lest we forget, the proliferation of artificial intelligence – that latest obsession of the chattering classes – will only serve to increase demand for power. A most fortuitous alignment of circumstances, wouldn’t you agree? At a forward P/E of 21, and a history of positive returns in 21 of the last 24 years, NextEra offers a degree of stability rarely encountered in this volatile world.

Sirius XM Holdings

Our second selection, Sirius XM, is, in its own peculiar way, a monopoly. A rather American phenomenon, that. While competing for listeners, it remains the sole proprietor of satellite radio licenses. A competitive advantage, wouldn’t you say, that allows for a certain degree of pricing power. But the true brilliance of Sirius XM lies in its revenue model. Unlike its terrestrial counterparts, reliant on the fickle patronage of advertisers, Sirius XM derives the majority of its income from subscriptions. A far more reliable source of funds, as subscribers are less inclined to abandon their entertainment during periods of economic downturn.

Moreover, Sirius XM generously returns capital to shareholders, boasting a dividend yield of 5.3%, nearly five times the S&P 500 average. And at a forward P/E of 6.6, it is valued at a rather substantial 45% discount to its historical average. A bargain, one might venture, for a company so comfortably ensconced in its position.

PayPal Holdings

Finally, we arrive at PayPal, a fintech leader navigating a crowded landscape. Competition, naturally, has somewhat stymied account growth, but the underlying metrics remain compelling. Total payment volume continues to expand, and the average number of transactions per active account has risen by 41% since 2020. A testament, one might say, to the enduring appeal of digital payments.

PayPal has also demonstrated a willingness to innovate, embracing ‘buy now, pay later’ solutions and returning capital to shareholders through share repurchases and a modest dividend. And at a forward P/E of less than 10, it is valued at a 42% discount to its historical average. A most agreeable price, wouldn’t you agree, for a company so adept at facilitating the modern exchange of value?

In conclusion, while the market may continue its ascent into the realms of the extravagant, these three equities offer a degree of prudence and resilience that is, in these tumultuous times, a most valuable asset. For, as any seasoned investor knows, it is not enough to simply chase fortune; one must also know when to safeguard it.

2026-01-29 12:13

NextEra Energy

Sirius XM Holdings

PayPal Holdings

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