coffeecaninvestor

I think there are pockets of the market that always look expensive, but I wouldn't say everything is expensive. You can always find out of favor sectors like healthcare, Aerospace and Defense, Small Caps, financials, etc.. or wait for some kind of company specific event to happen. Personally I think if someone is trying to buy high quality companies based on easily quantifiable metrics like ROIC those stocks are undoubtedly trading at a rich multiple. They become cult-like because everyone wants to own a compounder, and that is very easy to screen for. Hopefully one day they fall out of favor, but I think it would take a multi-year draw down to cause that.. Covid was pretty short, and everyone flocked to quality.

I agree but we aren't Charlie or Li Lu so our hit rate is bound to be less and/or luck will be a much larger component rather than skill/edge.

This might have been brought up before but it really got me thinking about the quality of GDP for countries, and the complexity of international investing. I was listening to a podcast (if I remember the episode I will send the link) and the guest was negative on China. His thesis was that the country is really great at producing GDP, but not wealth. He gave an example that they will spend billions building a bridge that will save the population making very little wages and the ROIC will be terrible versus doing that in the US where the economics are much better. I think China is in the too hard pile for me… I’m sure there will be some winners there, but on average over time I think things are just too difficult. I got close to buying Tencent mainly because a good chunk of its revenue was global, but didn’t pull the trigger. If CM only had a 50% win rate in China with Li Lu as a resource what chance do I have picking a winner there..

Have you see the price per lb for chips and other junk… I think If you factor that in with the added healthcare and Rx costs your saving money eating higher quality food.

+1 I am 35 and in the best shape of my life. I plan on consistently working on it until I am no longer here, and can see myself being in even better shape in my 50's+. The hardest part is starting, but once when you do it amazing how good you feel.

I wish I had taken better care of my body, and mind in my 20's. I drank way too much, slept too little, and ate like shit. Now that I am healthier I am much more productive and have a much better mind set. I'd also consider alternatives besides college. I was good at it, but did not enjoy it. I didn't put effort into getting scholarships, studying for SAT's, or going to the best college to fit what I wanted to do. If I had to do it over again I would put 110% effort into going to college or not at all. Going half heartily just gets you a huge pile of debt, and a really rough start to your working adult life. I probably won the lottery finding the right partner in college. Having a spouse that has similar views money, kids, life, politics, and religion makes a huge difference. I'd highly recommend people spend more time figuring this out.

I’ve basically have worked in insurance for my entire career so far and it’s always amazed me how well these brokers get paid, and how little disruption there is.. it’s pretty rare to even see a change in broker. From what I can tell it is mainly relationship driven which is hard to for me to wrap my head around moat wise. I should probably take a hint and just buy some brokers, and add to them over time.. I missed Copart when I worked at The Hartford and used their services on a daily basis. It would have compounded at a 30% CAGR over the past decade…let’s not compound the stupidity of missing two great businesses.

Thanks Dealraker for the story. 50% of the reason I bought the membership was for your commentary. You have been following the industry much longer than I have. Has there been competitor or new entrant that has tried to threaten then industry, but been unsuccessful?

Personally I’m not impressed with the average Americans ability to delay gratification, and live below their means. It’s pretty simple equation, but most don’t know how to.. so I am not surprised the % is so high. If you can do those two things it doesn’t matter if you get above average investment returns, or if you pay off your mortgage early doesn’t even matter. Personally I paid my mortgage off very early. My first starter home I paid off in 10 years. Then we paid off our next bigger home in a year after rolling the proceeds from the starter home. The home is approximately 1/3 or our NW, and at first it annoyed me not just investing that money but over time I came to appreciate being 100% debt free. Having a really strong personal balance sheet makes life stress free, and I can stay fully invested easier.

Since hearing about this I only buy high quality oil now. I’ve been meaning to get this book. https://villacappelli.com

Tiny add to CACI yesterday and today

+1 from a valuation perspective it makes sense. I was thinking SCHW, but unsure about valuation on that one.

I’ll check teck out. For the most part small cap outperformance Usually lasts 2 years of less in GFC & 2020, but it rips off the bottom. Small cap value didn’t do well at all. Homebuilders look attractive especially NVR it performed better off the bottom and did well long term.

I agree but sizing it right probably helps. I’m always looking for that elusive cheap compounder but clearly it’s probably not the ideal strategy come a market panic since people flock to those. I’ll have to do some back tests to see but I wonder if it makes sense especially in a 401k where most hold ETFs to rebalance to a small cap and small cap value during a big draw down to goose returns with a little less company specific risk. I wonder what the optimal holding time would be.

FICO almost made my list, and probably would if it was a melt down like 07/08 it really got cheap and performed crazy well coming out due to the crazy multiple expansion.

That has been on my mind. Over time I have come around to maybe adding in more cyclical businesses that have good balance sheets. I was thinking of adding things like homebuilders to the list and maybe DOOO to the list. The quality less cyclical names didn’t get quiet cheap enough, and I wasn’t prepared to buy the less quality stuff in 2020. A screen would probably have helped for the really junky stuff.

If you said Johnny blue I’d have been right with you.

I go through this thought exercise and try to keep a list of what companies I would buy if we get another major recession or flash crash type scenario. Most of mine are chronically too expensive so I’ve never owned them. Figured it would be interesting to see what others would buy in that scenario? My list would be CPRT, MA, BRO, HEI, ROL, CSU, BR, MCO.

Starter in CACI

Do you think that is a long term problem for LMT?

LHX has long term compensation EPS and ROIC metrics. They seem pretty adept at capital allocation. Hopefully as their FCF increases they can reduce their share count. I am a fan of GD as well I bought some in 2020 when it looked very attractive.

L3Harris Technologies Reports Strong First Quarter 2024 Results, Increases 2024 Profitability Guidance • Orders of $5.5 billion; book-to-bill of 1.06x • Revenue of $5.2 billion, up 17%, up 5% organically1 • Operating margin of 7.3%; Adjusted segment operating margin of 15.1% • Earnings per share (EPS) of $1.48; Non-GAAP EPS1 of $3.06 • 2024 adjusted segment operating margin 1 guidance increases from ~15% to >15%* • 2024 non-GAAP EPS guidance range increases from $12.40 - $12.80 to $12.70 - $13.05* A little pop out of LHX today... Seems to be heading in the right direction. They seem to be achieving the integration savings from the merger, reduction to debt, and they seem to be optimistic on the demand for Aerojet. They restarted their buy back but only enough to offset dilution. They mentioned they are going to be reducing and simplifying the adjustments to their non-gap numbers. I would like to see more prime contracts, and expansion internationally.

Assuming you have the business quality aspect correct the terminal value of a business will have a much greater impact than your entry multiple unless you are pay some kind of crazy multiple but even then you just need a really long holding period (ie buying MSFT in 2000). Which is why some of WEB's best investments have been modest growers, but for a really long time (GEICO, AXP, KO).

Forward but I would use a conservative estimate of future earnings. The more predictable the industry/company the easier this is.

+1 when I was looking into defense stocks I did this with general dynamics as well if you google it.