dpetrescu

It is interesting that the companies with fastest rising valuations are the picks and shovels companies - and their moat/advantage is speed of innovation. Having the highest quality technology/product now. It seems inevitable this moat will be broken down to a commodity. It is challenging to predict which industries will be completely torn down by AI tech over the next decade and more. I think One thing that is more certain, there will be some industries that will be completely destroyed - Blockbuster style. Ive been struggling in understanding how AI tech will play out - either AI tech are competing now to be the next Google in the future - the sole winner. Or the other idea - that all AI tech will be like electricity and will be commoditized. Speed of AI tech innovation will not be about code or tech innovation. Anyone will be able to achieve same results. but really just about power and chips. Seems to be heading towards the latter.. if that is the case, AI tech will be the new electricity. the biggest winners won’t be the Open AIs, but the stuff that plugs into this infrastructure of AI tech and creates the new moats.

Interesting question about market valuing SAAS. How can you value a company today that couple have a few years of growth and then is at Rick of falling off a cliff? There is a real risk a lot of SAAS companies with moats could be leapfrogged completely

What about Tyler? This was at one point Charlie Mungers holy grail of moats. It has taken a significant price cut. Even with all the AI advancements, courts and public agencies might be last in line to leapfrog software with AI. Maybe also DJC?

Autodesk already has chatbox AI assist. I imagine this will develop exponentially to be extremely functional. For now it feels like the teacher following 3rd grade students’ literal instructions on how to make a peanut butter sandwich. what is interesting for the near term next few years is that all the huge AI build will require a lot of designers and engineers and builders and owners to buy BIM seats! servers and energy generatin, utility operations centers and infrastructure is in a boom right now

I’ve been investing in Autodesk for almost a decade, it has been one of the easiest investments of my life, always a little expensive in share price but such a solid moat. My only two thoughts - really questions. Either way, looking a decade ahead this is no longer in the easy pile 1. In design, it is not about the product but about the interface. Every minute detail of a building design needs to be controlled and adjusted. Starting with an ai generated floor plan only makes it more difficult - building a design gradually from concept is more efficient. So my question is - how will AI impact the human -> visualization/documentation interface. I can imagine AI for example could take a rough hand sketch and convert it into a 3d documentation for development. 2. The moat for ADSK and other similar companies is the network of licenses. If a designer documents construction drawings in Autodesk Revit (this is BIM, CAD died a decade ago) all the engineers, consultants, contractors, subcontractors, product manufacturers, suppliers, and owners, and all public agencies also need those Autodesk BIM licenses. So question is - can AI somehow neutralize that platform and make the RVT extension usable (editable and readable) with generic tools? 3. I think AI will not reduce design, but it will increase amount of design. Instead of generic details and similar designs, it could pave the way for every most minute detail being customized and unique (form of every door handle, custom faucets, etc) 4. I can imagine a scenario in which designers are completely leapfrogged. If AI eventually is able to manage code and technical aspects automatically, it could open up design to the masses. Even as an architect, I like the idea of design being democratized. 5. So far there is zero impact in the AE & construction industry. But investing is a forward looking thing - Who knows how far into the future the moat will be tested.

Always interesting to read year end summaries and thoughts! I hate to be a broken record but not much has happened for me since last year. Next year will likely be the same. 80% - SSD 10% - ADSK 2028 LEAPS 10% - BABA and BIDU 2028 OOM LEAPS Some thoughts: Amazing how a few days (at start of this year) can generate the vast majority of gains. Also, Autodesk seems to have been thrown into the waste pile of AI collateral damage/disruption for SAAS. I’m thinking it might have a lot lower to go, happy to average down.

My portfolio as of now: Main conviction……..64% SSD……..54% ADSK……10% Other…….45% BABA LEAPs 2026 & 2027 BAIDU LEAPs 2026 & 2027 Small JD LEAPs 2026 & 2027 Small PDD LEAPs 2026 & 2027 EL LEAPs 2027 Remaining position in BYDDF Very volatile as one can imagine. It has been a great year, have gotten lucky. I typically just hold my top 2 positions for about 90% but the Chinese tech LEAPs have really taken off. TBD if this is like past temporary spikes or really setting new highs. I’m also running 10% leverage but only because I have a lot of options about to expire in a few months so will have a large cash position. I can’t tell if we’re in 1996 or 1999.

I’m a strong believer in self education and generally a critic of authority bias - against deferring to someone solely because they have a degree or because they are recognized as an authority in that field. That is the benefit of multidisciplinary education - it forms a positive reflexive loop - getting inspiration and insights from one field to another. One criticism - I have found it fascinating how some of the most brilliant minds can have such massive flaws in thinking. The famous examples of Keynes lost almost all his investments in the 1929 crash, Isaac Newton lost a fortune in the South Sea bubble. But there is another example… With investing I follow Munger’s approach much more than Buffett’s approach. I try to read Munger’s cognitive biases once a year to remind myself regularly. It’s amazing to me his one massive misstep - the danger of misuse of multidisciplinary and self education. His “architectural” design for the UC Santa Barbara dorm is a massive failure. It was an inhumane design and was misaligned with every basic concept and every first principles of architecture and the design for human experience. And I say this not even as an architect, I’m saying this as a human being. It’s still amazing to me how someone that I look up to so much for multidisciplinary thinking and investing wisdom can be the author of such a horrible design. And it’s not about the failure of design - I think failure can be a virtue and a benefit - it’s necessary. But it is the misguided thinking and those misguided architectural principles that led to the inhumane design.

Some people are just not rational. Have you told him that if he increases his daily gains to 6% his total return in the future would be exponentially higher?

I think it depends on confidence level in companies you’re investing in. I try to be patient and invest in only the companies that I understand and that I have confidence in - that they have and will maintain a strong and growing competitive advantage. And also are immune to being overtaken by technical/AI progress. With that criteria there aren’t more than 2 or 3 companies you might find in a lifetime.

I wasted more than 5 years of my life and life savings blinded by technical analysis. That was a long time ago. At some point I read Mandelbrot’s famous book and it changed my mind. Even today I sometimes think - if I’m going to keep buying one company for the rest of my life - why not also invest in and out a little in that same company with TA. Luckily I haven’t acted on this urge. We need a program for TA like AA. Like the famous renowned actor and psychiatrist once said, “people are always deluded into thinking it could work for them but….it might just work for us”

I typically don’t do much. But over the last 2 or so months I bought some more shares of my favorite company Simpson Strongtie. Today, price isn’t too high or too low, just about right. The market might keep playing games with share price as we search for the right long term interest rate. I think investing in SSD might be my hobby. I also did a little gambling that paid off. Reading the last Scion 13F got me a little intrigues and followed Dr. Burry into EL using LEAPs. Already more than doubled - but of course the lesson is - unless you really go all in on a position it won’t have an impact. Was also thinking about copying with POOL but then what am I doing? I would just be straying from the righteous path. Back to doing nothing.

I admit I don’t understand it. The numbers just look so good. How can a company growing earnings 100% YOY one quarter then grow earnings 50% YOY the next quarter. And then the market takes it down 20% and gives it a valuation of a PE of 8. This just seems silly. It’s a tiny position for me. If it’s not a scam or illusion and someone does understand this company there could make a lot here. But for me I’m just in it for a little gain

It’s just 2-years and a few months for the 2027 LEAPs. Good question - IV is all that matters, it’s the true measure of options cost. Nothing else matters. BIDU options prices are pretty cheap at 33 IV. JD used to have an IV of 50, it’s now about 43 I think - lower but a little expensive.

One regret (but not really) - is not using the lessons from value investing earlier in life. Imagine a life where very early you “invest” long term on your best 5 ideas in life - relationship, music, design, learning, health, etc. And you go all in. Every day you “invest” with your limited time and effort - to gain 7% improvement in those goals every year. Compound that return over a few decades and a person could reach wonderful heights in life. Like investing - the biggest challenge is finding the punchcard things that you can invest in for life that will generate for you specifically the most happiness and/or reward. Also like investing you can just chose life “index funds”, the human basics like health, nutrition, relationships, learning, etc. and maybe later you can add synthesizers, piano, Ableton

Black Friday sale came early for Chinese tech. I started loading up on some Chinese tech LEAPs due 2027 - now some BABA remaining from last year, little PDD, and quite a bunch of BIDU and JD. I figure it would be nice if they all drop 30% near term. I could double down once, maybe get some 2028 LEAPs next year. I do realize there is a decent chance these stay stagnant for many more years and some chance 2027 LEAPs could turn out to be worth zero. Not a high conviction investment for me - more of a cheap and good chance of double with 10x possible return via LEAPs. And even if that happens, they could still potentially be undervalued after.

Ahh thanks for the link, this is so interesting. I’m in the design and construction field and Simpson has been the Bible for decades. One small house will use hundreds/thousands of clips/connectors, each worth a few dollars and each needing to pass code testing and documentation. This creates a pretty strong moat. I used to watch all the old Buffet annual meetings now on YouTube and this company fits so well - simple, strong moat, longevity, product engrained in the industry, great financials. Berkshire bought MiTek and there’s no way they went with the #2 by choice. Every once in a while we’ll get substitution requests to use MiTek which is cheaper - and it’s almost impossible. Too difficult to change out so many clips with their own loads and testing and then relate it back to the building engineering calcs. It’s an advantage by a network of thousands of small products that each requires a lot of testing/documentation. They did fall behind on commercial mass wood construction products - new market over the last decade or so. They allowed others to take a market share and are now catching up.

I hate to be the broken record on here and name the same two stocks I have every year in the last decade. But it’s the: 1. Simpson Strongtie there was a cyclone on the west coast. Codes will always require more and more structural updates. My theory is Berkshire in their wildest dreams would love to acquire this but instead settle on the far nowhere close #2 MiTek 2. Autodesk Decades long moat story still playing out 3. ok so one new thing I’m getting into Basket of Chinese Tech companies when Someone says “uninvestible” time to look closely and consider investing. They’re cheap!

wow this is the first time I’ve seen someone here invest in SSD. That’s my life long investment punchcard. Welcome to the club! any highlights from the other names you mentioned?

Bough a bunch more Simpson Strongtie. This is my forever 80% of portfolio position. Below expectations earnings - down almost 12% at the bottom today. They definitely are tied to housing starts. Love to see the PE under 20 on this

All SAAS companies haven’t truly recovered and haven’t interesting you were shorting all SAAS companies haven’t really participated in the market boom of the last couple years. definitely some valid concerns and risks. I just keep buying ADSK for the last decade plus just because of their unique competitive advantage. Just got a bunch of 2 year LEAPs art the dip this morning im sure everyone here is tired of me talking about ADSK :).

I think I agree there. I’m using Revit every day for work. I can say it still has a long very long runway - as contractors and builders adopt it. Then product manufacturers are adopting it. And owners adopt it and maintain it for maintenance, records, and future renovations expansions. And public agencies still have pre-2006 2-d Autocad standards, they’re slowly adopting it….very slowly. Surprising how slow the BIM/3d adoption is considering its old tech by now for public agencies. the curveball is AI. I can imagine AI giving Autodesk either a bigger advantage or maybe risk of taking share away from residential and small commercial firms.

How do they mess up their accounting and delay their annual report? And all this after a big earning beat. I imagine this could fall another 10% or more. Either way I’m buying - hoping to load up on another 5% drop over the next week or weeks! what do you think of long term AI risk to Autodesk?

My approach is to find a couple companies that have a strong long lasting competitive advantage in a niche market - that can increase revenues and earnings at near double digit rates every year for decades and decades and is at low risk of tech disruption. this way you can have your entire portfolio in only a couple companies for decades. And the most importing - you feel comfortable doubling down every time it’s down big. Also makes investing easy….that is, once you find these two gems

Money is a scam if it’s not towards a purpose - to bring value. For me personally as an architect - I will always put the vast majority of my wealth into cost of building a custom home. Without much regard to market value of the house, without caring much if construction cost results in higher resale value. I do agree that big houses are such a waste. I’d rather have a smaller quality custom house than a wasteful mansion. PS….as much as I look up to Charlie for his general wisdom in all things and investing. He was not a good architect - his proposed design for the California residence structure is a massive monstrosity.