Spekulatius

That’s true for a business that requires Capex too, that’s the feature of exponential growth not capital light or Capex heavy. if a Capex heavy business can keep the incremental return on invested capital high, it should do just as well.

But these hedge funds don’t advise you. You are not their client. They have fiduciary duty to their client, not you. We have brokerage reports that get distributed to clients before they hit the newswire and that in some cases clearly move stocks coming out pretty much every day. We have Cathy Woods with their whacky forecasts and even return targets, Elon Musk pumping Tesla stocks and otherwise talking his book. The list goes on and on.

I think the day people realize that the mighty 6 or seven have become Capex heavy companies, with substantially worse FCF conversion than they used to have, will be interesting. Right now, everyone seems to believe that they will generate great returns on their AI investments. Even if this were the case, the returns will most likely take quite a few years to materialize and there will be winners and losers. So far nobody seems to consider the fact that there will be losers. This looks very much like the telecom boom from 1997-2000.

While it is mathematically correct that if both business have the same growth rate, they should have the same returns, the more Capex heavy business will have to constantly make decisions on Capex and some of those probably won’t work out, Then there could be lumpiness in Capex, which also increases risk as FCF would ebb and flow. All this means that a Capex heavy business in practice has higher variability and higher risk which over time means it is probably not going to perform well. A significant part of the Capex decision I have seen at work had issues with cost overruns, delays or the business changed in a way that the initial assumptions at the start were not correct any more, leading to suboptimal outcomes. A Capex light business does not have these issues so the math being equal means it’s likely a better investment. I think the other issue is that a lot of stocks still traded more on earnings then FCF, so focusing more on FCF (which is harder to determine ) is actually a way to outperform as an investor.

Trimmed a bit TPB. It is probably going to the moon now.

Yes, there is: EVO looks cheap, but there is some concern that the high margins may not be sustainable. They also saw some margin deterioration this quartet.

Bought some EVO /EVVTY today.

Nose hair is one of the few perks of getting older.

I never got COVID either or it was asymptomatic. I tested negative several times when my wife and my son got it at some point.

No insurance company either, or mining co’s or retailers (if you don’t count the drugstores WBA or CVS) . Exxon made it in there in the energy sector.

I have not much too add except noting that the list contains some fairly poor recent performers like WBA, CVS, BMY and PFE due to the length of compounding , even poor performer can stay on that list for quite some time. Some industries that have been fantastic performers for many decades like Pharma or drug stores have become much worse business. I doubt that those business will have market leading returns going forward although we have Novo Nordisk and Eli Lilly here. As always, you have to watch how these business evolve over time. Another note is that there is a fair amount of defense companies in that list (Northrop Grumman, Boeing, General Dynamics but no steel or media companies or banks (those have been around for a long time) and only one chemical company (FMC)

Maybe the industrial policies work in the long term , but they suck for investors: https://www.wsj.com/world/china/feared-in-the-west-chinas-manufacturers-struggle-at-home-8a64f2c3?mod=lead_feature_below_a_pos1 Check returns on capital for Chinese companies. Thats part of the reasons why the valuations are lower. I do think we are seeing some changes where companies like BABA are trying to improve their capital allocation and capital returns.

Here is the whole paper from Bessemer about the best performing stocks with the largest cumulative gains. Awesome stuff. Got to survive (for a long time ) to thrive. Bessemer - stock returns.pdf Tagging @dealraker here.

I have no idea how Swatch can do as badly then they did during the last 15 years, They owned so many brands at so many price points and they generate 80% gross margins but someone how their operating margins have more than halved to ~10%. They seem to care less about profits than the post office.

The problem with most of those names is that they are more expensive than JCI. I also bought the stock when it was at low 50’s and think I just keep it. The business has huge LT tailwinds and it could become a LT compounder after shedding so many lousy business (batteries, auto components etc).

Well realtors and those business associated with realtors have a bunch of problems, both temporary (lack of transaction volume ) and probably permanent (falling commissions). On single family homes in general we have hit the affordability limit in many cases - a result of a double whammy of higher prices and high interest rates, which typically don’t occur at the same time. The result is that affordability is at a historical low and it’s looking even worse than 2006/2007. Renting is much cheaper than buying even when you take out the amortization of a 30 year mortgage payment virtually anywhere. Something is gotta give. Just two datapoints, Realtors in open houses I have visited have told me that the market has shifted into a buyer market here since May. This is not reflected in public statistics or even news articles here at all which still talk about a sellers market. A shift from seller to buyers markets generally means 5% off right off the bat, typically in the form of incentives, free repairs, rebates and what not. The price changes in stats come later.

@DooDiligence I am certainly biased but I like the boutique German watches more so than the Swiss ones. I used to wear a watch since I was like 5 and went to school. Got used to have something on my wrist and it felt like something was missing when ai didn’t. Then almost 50 years later I lost my one of my watch on a trip and go used to not wearing one. By the time ai got home, I didn’t not really like to wear a clunker on my wrist any more that relay went needed since my phone gives me the time. Any wife also used to wear watches but as a nurse, the Apple Watch is very practical so she wears those and all her watches including an expensive Rolex she got as a gift from her Mom went into the drawer and barely see the daylight again. We bought our son a watch too and Inhave almost never seen him wearing it, because obviously the smartphone replaced it. So over time, I think the population will change to one that is not used to watches any more and my hunch is that they won’t care about luxury watches as much either. Sort of like collecting stamps was really popular 40 years ago, but who uses stamps any more or writes letter, so the number of stamp collectors has a gone down and so have the prices for all but the highest valued ones and those have seen less appreciation. Cars could have similar problem if everyone just rides Uber in 50 years and cars are not part of the daily culture any more and transportation becomes a mere utility. Than would shrink the number of buyers , simply because less people are interested in those products, I think.

What is scary about these luxury companies is that the product can become irrelevant due to change on consumer preferences the brand running out of fashion for something else. What would happen if women do f care about handbags in favor of different accessories? I think this happens with watches to some extent where people just prefer smart watches or a different crowd of people does not wear watches at all as they grow up without them. I never collected watches, but had a few nicer worn that I rotated and wore a watch my entire life until I didn’t. After all I had a watch (smartphone) in my pocket. If you grow up without watches or rely on your Apple Watch for many things, you may just have no desire to buy an expensive watch as an accessory. Same thing that happens with booze potentially. I guess you just have to follow these slow changes over time when investing and hope that management is good enough to recognize them. Now here is another company that understand untapped pricing power - AVGO. These guys are masters at charging more for products or features that were free before once they buy a business..

Sold Baxter $BAX due to concern about capital allocation - in particular the potential sale of the Kidney care business. Made a bit money on that one but nothing earth shaking. My concern is that they sell Kidney care business too cheaply and then re- baseline expectations Given their track record , I do think the concern is a valid one.

Jennifer Zhang is not exactly a trustworthy or unbiased source on all matters concerning China. She has carved out a niche for her self as an extreme China doomsdayer. If this rumor is true, I expect shares of Alibaba and others to mysteriously rise long before the official news is announced, because people will know the truth through underground news networks and trade on them.

The new kid in town starts trading today - TWFG: https://www.sec.gov/Archives/edgar/data/2007596/000162828024031867/twfginc-sx1a2.htm I looked through the S-1 and there is a similar OpCo - LLC structure than with BRP where I think the public shareholders will pay a lot of taxes, but I could be wrong. They don’t have much debt though. PE looks high - 40x. Worth keeping an eye on, imo.

FIVE went bad quickly. CEO left earnings warning and very lousy SSS. https://finance.yahoo.com/news/five-belows-ceo-president-steps-221245209.html

Reduced Google anfter experiencing first hand how Google search can be demonetized at work (see Google thread).

What they really should do is sell the bank for book value and keep the shareholdings.

Sold VSTS. Made some money of that one but have some lingering doubts that this will be an easy turnaround and there is a lot of debt.