Spekulatius

BRO Q2 earnings look phenomenal. Almost ~25% topline growth and even higher earnings growth. <1% share dilution rate. Of course they benefit from large acquisitions last year and the organic growth due to the hard insurance market, which creates a lollapalooza of sorts for the brokers. https://investor.bbinsurance.com/news-releases/news-release-details/brown-brown-inc-announces-second-quarter-2023-results-including Still nothing but astonishing for a more than 80 year old company.

Its the same in the Bay area - the business downtown are dead and the satellite cities like South San Franscisco become super vibrant. Further away from the large cities, there is no difference to pre-COVID-19 - nature has healed there, at least where I live. I am speaking for small towns like Lowell or Nashua NH. If anything, they have improved a little.

Comcast did a great job with Telemundo. Telemundo has gained a lot of market share in Spanish language TV from Univision as they weren’t from distinct second to going toe to toe. OT - since Peacock carries Telemundo and Telemundo carriers many sports event, subscribing to Peacock is great way to get streaming access to live sports event (on top of the stuff that NBC carries), if you don’t mind Spanish speaking commentators. I restarted my subscription to Peacock just to watch the Woman soccer Worldcup on Peacock.

The worst DCF’s I have ever seen were Excel model for large Capex expenses that were mandatory as a decision tool. There was a very high hurdle rate (I think it was higher than 20%) and those models were massaged until the hurdle rate was exceeded. You also had to exceed it a bit, because of margin of safety. I have never seen a management backed project that failed because it didn’t meet the hurdle rates on paper. In some cases, costs were reduced by omitting equipment or expenses that were prudent to reduce risk, which of course increased the rate of return in that DCF model but increased the execution risk (which didn’t show up on the spreadsheet). So this thing was gamed basically by design.

Yes, I heard about a wolfram browser plug-in that can be used with ChatGPT which sounds cool. Unfortunately my work does not allow browser plugin downloads and they also blocked ChatGPT now. I think most of the value will be created with additional application running on top of ChatGOT and other AI chatbots that allow for a more tailored experience. For the history issue, I was sort of responding to someone I follow on Twitter who claimed that his son wrote a history essay using ChatGPT and I just wonder if he ever checked the work, because when I tried it m it produced junk and half truth output that looked good when you look at it at first glance and then when you double check it , it is almost all wrong. That sort of output is imo the most dangerous one. It’s like an all knowing idiot who seems to know everything but upon closer look it’s all gibberish and incorrect. I can see a coding Assistent having quite a bit of value. I don’t code but do a lot of work in excel and I think an AI assistant done right could add enormous value and I think that’s what MSFT is after with their $30 add on subscription offfering.

I use DCF’s ins a relative sense to put some numbers on qualitative assessment I am doing: 1) if I think a business will deliver consistent results with low cyclicality I lower the discount rate a bit 2) If I think a business has a longer runway, or large addressable market I increase the number of years for the growth period. 3) If I think a company growth faster, I adjust the growth rate (that one is pretty obvious). In all cases, I start with a qualitative assessment and do adjustments to the input which puts a value on those qualitative adjustments. While I can in no way assume my adjustments are correct, I think they should be directional correct (or my qualitative adjustment are just plain wrong) and it helps giving me valuation ranges based on quality factors. I use the Gurufocus DCF calculator for this and often does this in a “reverse DCF mode” where I calculate back to the current EV and then determine if the underlying inputs are conservative or seem stretched.

Awesome primer on this. That for sharing. I followed you on SA as well. Somewhat unrelated, I still struggle how to use both BARD and ChatGPT and get useful results. For once they are both absolutely terrible in math. I tried to do some history research using BARD/ChatGPT but things I know a bit about and thy can’t be found all that readily in history books. In my case, it was about the liberation of the Mosel valley in March 1945 by US forces in WW2. I don’t know where both get their info from but pretty much any detail is incorrect , some partly and much completely. Bard and ChatGPT both contradict each other and depending on how you ask questions, they are even contradicting themselves. The answers are not totally incorrect, so I think these Chatbots are making stuff up based on similar events that were playing out at about the same time a d/or extrapolation. So I think students who use this to write their paper as a short cut for real works are in for a rude awakening. (FWIW, the liberation in question occurred from March 14 to March 18, 1945).

@valueseek Very interesting company. Impressive track record. I put SESA on my watch list. Thx for posting.

OT - Digging into this book about Spirax- Sarco, which you can order for free (!) from the company. Ordered it a week or so ago and it just arrived today. My wife thinks I am crazy. https://spiraxhistory.subscription.expert/

No, I don’t have much concerns specific to USB, but want to get my exposure level down so that I maybe can add back a little if the shares give up some of their gains. I do expect the near term future for banks to be a bit rough due to the inverted yield curve. USB is very reasonably valued and they did a good job bumping up their CET1 capital level to 9.1% , so I think the risk of a capital raise is greatly diminished.

Buffett is a financial math wizard. I think he can do a DCF in his head and that's why I think he doesn't need run a DCF spreadsheet - he has an intuitive understanding how much something is worth that starts with FCF X and growth with Y for Z years. He also uses other frameworks to estimate value. I think running a DCF (or even better a reverse DCF) is a good valuation tool. It's not he end to all but playing with outputs and observing the impact on valuation helps ordinary people like us who can't run these calculations in their head.

I use the simple discounted cash flow calculator from Gurufocus: https://www.gurufocus.com/dcf-calculator?ticker=AAPL The value lies mostly to see how changing input parameters like growth rate, length of growth etc impact valuation. You can also calculate backwards to the current valuation (by playing with the input parameters a bit) to determine if a stocks current valuation makes sense to you.

if you like to listen to an AI bull in podcast format: https://podcasts.apple.com/us/podcast/tech-trader-the-outlook-for-q2-tech-earnings/id1523729084?i=1000621565711

I guess the question is what sort of safety margin in terms of rate increases was build into the mortgages at origination in Canada. The US is mostly a fixed rate mortgage market, but every other country except the USA does not have 30 year fixed mortgages.

Sold a bit of USB to reduce my exposure.

Yes, that's a good one page summary of the situation. Now how to handicap the risk that is the question here and where we differ. I was of the opinion that China continues to open up and the CCP through internal reform over time become more democratic. Whether that leads to some western style democracy or stays a benevolent a one party state run by committee that balances different fractions was unclear but either state would be fine, at least from an investing POV. Having this moving towards a personality cult with all the negative ramifications was not something I considered likely until about 2020 but here we are. Hopefully the pendulum swings back at some point but that's a different judgement to make and will only happen post XJP reign.

The Saudis also invested in Twitter stock (post buyout) and CS just before they went belly up. I don't think it's a good idea to follow a Brontosaurus with a squirrel brain as a small guy just because it's big.

EV's are definitely getting cheaper, Tesla as the largest EV producer for now is pushing down prices for the rest. I think the cheapest Tesla is now cheaper than a Camry in some states, if you include subsidies.

@SharperDingaan joint is close to Ottawa. If you are in the Toronto area (Mississauga), I can recommend these guys: https://www.cameronsbrewing.com/ They have some value deal to get 20 cans for 30 CAD or something like this, if you pick it up. They deliver also. Couldn't do the deal on vacation - it was a bit too much, but did buy a few cans to bring home as a souvenir. I very much liked their brews (Pilsner, Red ale, lagers were all good). https://www.cameronsbrewing.com/ Beerflation is still not to bad up there or around home.

Yes, the best performers stock charts often look like Hockey sticks. I would like to see a study of how former 10 bagger have performed in a subsequent decade, preferably segregated by valuation buckets. it would be interesting to see if the stocks that were 10 baggers in 2002 still outperformed the market in 2012 or the 10 baggers in 2012 outperformed in 2022 in aggregate.

I need the list for the next 5 and 10 years. Here is a study on 10 baggers - it shows the importance of starting multiples and market caps: https://behindthebalancesheet.substack.com/p/a-blueprint-for-10-baggersy FWIW, I think studies on 10 baggers are more useful than studies on 100 baggers because there are way more datapoints and also because 100 baggers are just 10 baggers that do it two times over.

I mentioned this one in an investing thread regarding the entertainment industry: https://puck.news/podcasts/the-town/

Fact-check and Reuters says you are wrong: https://www.factcheck.org/2021/08/instagram-post-wrong-on-u-s-casualties-in-afghanistan/

The exit from Afghanistan was decided by the Trump administrated and executed under Biden (poorly). In foreign politics there is much more continuity than disruption. One reason is most presidential candidates get elected for the domestic agenda, not the foreign one, so the foreign one is mostly an afterthought until they take office and then the path of least resistance is just to continue. The trade war with China was started under Trump and continued under Biden without meeting a pause. It will be continued by the next administration whoever that might be. Same thing with Ukraine.

Kerch bridge hit again. More than a scratch, I think: