valueseek

Small $on,$jbht.

Calcium score for over 45 i think

Good. Would you mind elaborating the expiry on those options for cpng? And your strategy of selling options - would you sell 1-1.5 year out options as well if they go up? Thanks

When did Munger blow up? In the 70’s?

All good points. I will just add this to @Gregmal's excellent point, it is very very difficult to really pin point on which valuations are out of whack to the upside etc. Barring the really crazy time of the spac and tech. mania from 2021 it has been hard throughout the last decade in doing this. In late 2022, NVDA touched below $120 or so for around a month - that is some 15 months ago. Estimates are for it to print $20 EPS in 2024 - buyside expect at least 10-20% more. Back in Oct. 2022, 2024 EPS estimates were $5.5 or so. So the earnings power has gone up almost 4 times in last 15 months with stock up close to 5 times. Until a month or 2 ago, stock was also up around 4x from that Oct. 2022 bottom. All it says its very hard. For the analysts who follow it, for most of the company management involved as well - it is very hard. I am not arguing whether this situation for NVDA sustains or shoots higher or lower. Given its stronghold, everyone invested could lay out several reasons it could (CUDA, 95% market share, etc.). While many could say otherwise (GM's very high, pricing will go down as AMD enters, inference foothold will not be as strong as training, etc.). My take has been it is too hard for most investors to forecast. Best is if someone has it to keep holding it or the next best is to not be bothered about it or the next best depending on one's ability is to trade around it - that is what most of the big pod shops do - but one needs focus around this trading strategy imo. Anyways, for individual investor one cannot really have staunch views on such stocks where things keep on changing so rapidly - rather the views need to be updated constantly. @Spekulatius on comparing AAPL with KO in 1998. KO was around 45-50 times forward PE. Since then sales, EPS has grown around ~3,5% resp. Total price CAGR has been 4-5% or so including 2% div. yield. While SP500 has total return CAGR'ed some 7-8% during this time. While AAPL at 28 times is high and all and is not value. If one looks at how iPhone has behaved last few years (with units constant and MSD price increases), and services growing HSD/LDD, overall GM's increasing significantly as service margins are double the product margins, and 3-5% buyback. There are risks to this as well with services regulation, China competition, no real upgrade value of iPhone. Keeping these aside for a bit, if one assumes overall sales increase 4-5%, buyback add say 3-4% with 0.5% from div. yield, one can get around 8-10% and then assume a multiple degradation from say 28 to 20 if the moat still holds over a reasonable period of time. It still could be ~7% total CAGR with not much tax consequence esp. for someone of the size of Buffett - esp. for the size and time of life in Berkshire balance sheet right now vs. back then.

Memories are shorter esp. in the semi space. If one looks at the guidance of these management teams back in 2018, it will be clearer eg. NXPI, etc. Or ADI that is very well regarded more recently. Or MU from 2022-2023 when it was regarded by most investors that the commoditized nature of the industry has gone away due to supply side rationalization. Anyways, but some credit to them that most have been managing the inventory situation much better than in the previous downturns.

on the point about LEAPS, @ERICOPOLY on this forum has had some tremendous success in deploying the warrant and LEAPS strategy in the previous decade esp. on bank stocks. I went back and studied several of his posts. My very crude basic in LEAP's is buying mostly for stocks that are just incredibly cheap by most parameters and there is just a lot of fear/etc. around those names, buying the longer dated - 2 year out if they are 10-20% or lower on the strike price (new are generally available in Sep.), choosing the strike price generally around the trading price, and rolling over 1yr-6 months before expiration. Have only used this sparingly thus far - JPM back in 2015-2018 time frame, and $C just this Oct. Have worked out pretty well thus far. But sizing has been particularly poor.

this is one interesting book. Definitely a thumbs up.

RIP! I listened to the Acquired episode just yesterday. First time famous personality death feel sad.

There's a change in this interview Todd Finkle probably lied about Buffett telling him using DCF to value businesses. Anyways, for most businesses, DCF is the way transactions are done in the world. They are done on multiples eventually but it is an output from the DCF. Again, it is not to be said that one uses DCF he/she has forgotten to do much of the other things (diligence, knowing the industry, quality of business, management, etc.). Also, one can get a dcf on anything but one of the key metrics tends to be ROC in an operating business. All such metrics can be easily gotten ahead or from the DCF (for eg. ROC - NOPAT+DnA-maint. capex/Net ppnE, accumutaled dep., non-cash int. bearing liabilities). Buffett is on another planet. he has 70-80+ years of experience. Maybe after the first 1-2 decades, one doesn't need any calc. Also, depends on the inv. understanding and philosophy that keeps on evolving over time for most. Starting with a sub 15PE and some growth, all things equal starts off with a 10%+ return - so there are always different methods for everyone. I think having a consistent process is important at least for me yet turning as much rocks possible. DCF can be used to come at the market expectations of most operating businesses. I am in all probability rambling so will stop.

I have used it as a check - more reverse one. To Vinod's point, I remember Buffett pointing several times the value of a security being the discounted cash flows. The minutia of details and assumptions and a standard process are for everyone to get to. With multiples, there is some kind of DCF embedded in anyways. Every situation is different - so there are a variety of industries (eg. banking) and asset situations (real estate), where DCF is not the norm. generally. DCF would just be a tool - imho more in stock analysis is about one's experience, psychological makeup, decision making and pattern recognition.

@xerxes. You are right. Last 20 years, NOC, LMT bought back some 4%, 3% of sh. outst. annually. While RTX increased sh. count by 2%. That explains most of the delta in the annual stock performance bw. NOC/LMT and RTX. Other difference is the margin expansion at NOC has been at a faster rate in the last decade from a lower starting base of margins. Vs. RTX margins are reasonably at the higher end. Anyways, at these levels with a longer time horizon, HSD-LDD kind of total annual returns seem very reasonable - a lot more buybacks than in the past would need to move them higher as sales and margins are not going to be the drivers here.

I recently did the exercise with RTX. Went to the last 20 years, when the stock traded at lowest valuation vs. say past 3-5 year history, the overall stock return to date (obv. impacted by the curr. forward PE multiple as well), was 9-10% per year or so. So not bad but not what I would have guessed. Last 20 years RTX EPS growth has been 7%. So I agree, RTX looks good here for medium long term but harder to get north of 10%+ for longer holds. Just my guess. The UTX deal may have messed up some of the numbers but I tried accounting for it. LHX on the other hand had grown much more than RTX over the years through various acquisitions. Going forward, EPS growth may be higher here. Anyways, looking at 10-20 year PE multiple charts, defense stocks go through bouts of lower and higher PE's. 2018 their PE's went to astronomical levels being compared to cons. staples. - that is how the 23+ times forward PE multiples were being justified. PE multiple collapsed to 11-12 times in 2020 as defesne spending outlook shrunk with Democrats win. 2022 - the Russian Ukraine increased the PE to 18+ times. Since then the PE's have been coming down. The defense businesses are different than core manufacturing businesses as in the margins dont keep on expanding much but the defense businesses generally are quite capital efficient - dont use a ton of capex and govt. subsidizes some of the R&D. Anyways, buying them below 15 times PE has worked out well generally with 8-12% annual returns depending in the time period.

Wow… stopped listening to Bass several years ago… but this is news that he was long Chargepoint… quite hilarious if it is true that he were long this

Starter in $WCC

Put in order to buy starter in $JCI.

I will just mention I met with $ASPN company management a few years ago. My recollection is it was one of the worse meetings where it was very evident doing some work management it fleecing the shareholders with some promise coming on the energy fracking side if I remember correctly. May be the story etc. all have changed, and outlook seems much brighter now. But I still see the same CEO - I for one will be wary. For anyone doing research, it is good to look at what they said and did from 2013 to 2020, what was CF, what was the dream and how much the management got paid and were they even required to be public, etc. Quick glance shows share count increasing from 24M to 70M roughly in the last decade. Hopefully for ppl involved, things are going to be different going forward in terms of prospects they are selling

I agree, while there is definitely some bias from the house, majority of what the analysts do are more individually driven. Plus their modus operandi is to cater to the fast money hedge funds - majority of whose outlook is 3-6 months. Even big long only shops dont want to have a loser in their portfolio for 3-6 months, be it how much long term one says the institution is. If it is not an institution and more boutique shop or a small knit team on the long side, they can still bear 6months 1 year performance going into the stock but it is a very small number of people and not the ones primarily whom majority of the sell side analysts cater to.

From an ROE perspective, SPSM/VIOO are in the 10-12% range, ND/EBITDA in 2+ times. SP500 dominated by the tech. titans has ROE around 20%+ and ND/EBITDA around 1-1.5. SP500 margins are much higher than small caps where one can argue they come down over time. Not arguing against the PE multiple difference bw. SP and small cap but just throwing some underlying stats.

Thanks @longterminvestor, @Dudley and @dealraker. Attaching the initiation from a couple years ago. Without taking into account the end opinion, the report is reasonably good in terms of industry analysis and background - one of the more diligent analysts on the insurance side. Ryan Specialty Group __ Multiple Levers for Outsized Growth, but Valuation Appears Full; Initiating with Neutral Rating.pdf

Thanks @Liberty for pointing this out. I pre-ordered it as well and started reading. Have still to go through fully. Quite good thus far.

Did not want to create another thread. But $Yell goong bankrupt, most probably chapter 7 liquidation, the stock traded 4+ times its total outstanding shares today. Yesterday trading was crazy as well. Most ltl chapter 7s dont get much. They have some 300 terminals, out of which some 170 are owned and rest leased. Of the owned guess is max half would be above 70-80 doors or worth significant to strategic sellers. Tractors and trailers age is up there as well. Reports that MFN partners buying the stock but dont know about their debt holdings here. Havent done any more work but found v interesting.

Thanks much @longterminvestor. Just great color and insights!

Hi @Parsad I second the comments and sentiments of many on this forum. I have followed many a different forums, channels, research services, etc. in the past decade. This has been one of the best in terms of overall life and investment related learnings. So thanks for that and to the excellent posters here willing to share their thoughts and experiences. Thanks.

Thanks so much @longterminvestorfor your invaluable insights. Worth their weight in gold! Have been reading about them most of yesterday and today. Had a few questions on Ryan - not urgent at all. Wrt wholesale brokerage business, my understanding is that the retail brokers still primarily own the client relationship. If this is true, then can the Aon, mmc, etc. threaten Ryan, amwin or Crc to move business away from them and/or continue to keep more of the commission for themselves? In other words are retail brokers more robust a business and could they squeeze margins from wholesalers over time or the technical knowhow wholesalers present doesnt allow the retail brokers to do that? I guess wholesalers would have pricing power or much value creation for the sub $10m rev. retail brokers? How easy is it for large producers on the wholesale channel to go out on their own and start their own shop? In other words is it more difficult at wholesalers to do that vs at retail brokers because end clients for the producers at wholesalers will have to be the retail brokers? From a producer perspective, is working at a wholesale broker a tougher job or higher paying job than retail or both are similar and does not matter? Seems to me wholesale brokerage might be a better higher paying gig with higher inherent growth as well. In Ryan’s slide regarding the growth algorithm, any comments 1 growing from panel consolidation. How big of a tailwind is this given the market seems already quite consolidated with the top 3? 2 e&s market continuing to grow 4-6% above admitted market growth rate. This has been happening for the last decade to the tune of 500bps or so but of late there seem to be at least in some conference calls discussed that this trend may reduce. Any thoughts for next few years on this? 3 how much contribution from MnA in this wholesale brokerage space one should assume given top 3 are 70%+ of the market already (and only wholesalers vs 1000s of retail brokers (mmc, aon, etc.) that are much less concentrated in top 3 at around 25% or so. Or would it be that they could be acquiring on the retail side as well? 4 Which between the mga/mgu part of the business and the binding authority part of the business is the more attractive from a growth and industry structure/tailwinds perspective? Thanks