Saluki

Bought a little JOE and some more Kraken Robotics. Sold some STNG I bought exactly 1 year ago and bought an equal amount of TNP.

Trimmed some BRK.

I heard someone mention that the NY Times now makes more from games like Wordle than they do reporting news. It sounded wrong, but I looked it up: https://www.axios.com/2024/01/29/wordle-nyt-games-news-media-layoffs The company's subscription revenue increased nearly 10% to $418.6 million in the third quarter of 2023 — with digital product earnings rising nearly 16%, to $282.2 million, driven in part by bundles. Buffett realized that Textiles was a bad business and he didn't keep the money losing arm because Berkshire is a textile company. By contrast, Sears always saw itself as a retailer, and the people at the top were jealous of the fast growing and highly profitable new parts of the company because it was a threat to the power of the retail executives. So they spun off Allstate, Dean Witter and Discover card, and stayed a retailer. I wonder if the NYTimes will eventually realize that they are a gaming company, and get rid of all those reporters, printing presses and news offices and just focus on what is actually driving the train forward.

I don't see a post for it. Maybe you start one? I added some OXY and KRKNF.

This is the second part of a two-part interview on the Knowledge Project Podcast. It's audio only, but has some good ideas about process vs outcome and dealing with setbacks.

Thanks. Yes, when I looked at a few companies in this area it seems the ship has sailed already. I'll mentally file away the idea in case something changes so that I don't miss the opportunity if it presents itself again.

My guess is either borderline personality disorder or some serious insecurity. With the former it would explain the outbursts and attacks from any perceived slight. With the latter, I've seen that up close from an old boss that I had. If you are incompetent and insecure then you can't receive feedback because anything that isn't praise feels like an attack. Even after my old boss retired she would rant about things we had done since she left when she ran into someone from work on the metro or in a restaurant. But when someone told her that her former protege had a death in the family, she didn't even send an email. What a horrible way to go through the world and deal with people.

I came across this video podcast which has some great interviews with people like Morgan Housel, Tom Gayner, Chris Davis and Reid Hoffman. This one isn't finance related, but I always find that Seth Godin has thoughtful takes on business and life.

If he ever comes back, I'll send him an email and say that your real name is Paul Pelosi.

I think one of Buffett's underappreciated skills is his ability to "see around corners" as Alice Schroeder described it. He didn't foresee the 9/11 attacks, but he knew that terrorism is an underappreciated risk in insurance and had been pushing his lieutenants to reduce their exposure to liability in marquee structures that might be targeted. When he purchased the railroad, there was speculation that one of the reasons that he bought it through one of the insurance subsidiaries is that it was partly to use the float (free money) but also because if it was in an insurance company, the state regulators might not let you sell it off because it would reduce the capital your insurance company had. So in essence, he was making it harder for his successor to split up BRK and sell off pieces. I may be misremembering, but I think BNSF was transferred out of the insurance sub by Warren. He may have been removing the handcuffs or maybe it was something else. He mentioned in the last meeting about regulators in the Utility space and Insurance litigation possibly causing future returns to lag compared to past returns. The recent PacificCorp payouts from wildfires may be a trend. Maybe he is making moves to make the insurance subs and utilities not be a target for litigators looking for a fat wallet, or politicians looking to upgrade the grid at the expense of utilities instead of taxpayers. It's one thing to say that you won't keep investing in energy if they don't provide adequate returns, but the assets you have are stranded and they have to be maintained. If you don't keep much cash in the register, it's less tempting to try to target them.

Lots of things on sale in the past couple of days. Even though I have enough I couldn't resist a little OXY under $60 and CPNG. Slowly building my small positions in TNP, TAYD and KRKNF on the dips.

I trimmed a little SWBI I trimmed some STNG that I purchased a year ago and bought the same dollar amount in Tsakos Energy.

You wouldn't go to a vegan restaurant and say "this place sucks, why don't have real meat?". Because there are lots of places that serve meat, and those are for you. This isn't for you, and that's fine. There are lots of places on the internet that have forums that are free and anyone can join and people are free to use ad hominem attack they want when they disagree with you. This place is for vegans.

Interview with Terry Smith of Fundsmith. https://www.fundsmith.co.uk/news/2024/5553-5553-the-market-nzz-valuation-is-not-as-important-as-quality/ I like how easy he makes life for himself by just avoiding entire industries (Oil & Gas, Banking, Insurance) that are cyclical, require a lot of debt, or don't earn good returns on capital.

With the initial Game Stop short squeeze, which has been the topic of numerous news reports and even a couple of documentaries, there were more shares shorted than available. This set up the super squeeze. It also set up a problem that almost wiped out Robinhood because all that trading in volatile options required net capital which they didn't have available to post. I never worked at an investment bank but I think a lot of the problem was the reflexivity in the markets that Soros talks about. Yes, if a company is in trouble and it's stock goes up a lot, then you can sell shares and now you're not in trouble anymore. That's good. But it's a double edged sword. If the people on the other side of those option trades are the people who do it for a living and want to run a balanced book, not YOLO trades, then they need to hedge the position as it moves. (Delta Hedging). If they sold a bunch of options (100mm notional shares) that has a 5% chance of finishing in the money, they will likely buy 5mm of the common to hedge it. If goes up a lot and now has a 50% chance of finishing in the money, they don't want to get caught out, so they will hedge buy buying another 45mm to hedge. But that massive buying drives up the price so they have to buy more. Reflexivity. So when the Roaring Kitty crowd starts cashing in their chips, those same traders will sell off their hedges and drive the price down. The lower price means they need fewer shares to hedge their position, so they sell more, and it's reflexivity the other way. It's obviously going to end in an ugly way. If, like me, you don't want to go long or short this train wreck, is there some other play here that isn't obvious but will be affected, good or bad, when the trade goes the other way? Like the Robinhood stress etc.

Mexico has elected it's first woman president. That outcome seemed a given since the candidates from the two largest parties were women. The winner is from the same party as the current leftist / populist president: https://www.cbsnews.com/news/mexico-first-female-president-claudia-sheinbaum/ The markets are understandably not happy about it. The Mexican Index and the peso are both down, and some companies which populists like to demonize, like Grupo Mexico, the mining company, are down over 10%. Time for bargain hunting or cutting your losses and checking back in four years?

Bought a little OXY on the dip. And trimmed a little STNG and bought some TNP so that I can still ride the product tanker wave, but do it with a company trading at a lower NAV to protect the downside.

Kratos is a drone company I looked at this weekend. US based and has US military contracts, like the big boys. I think it's trading at a ridiculously high valuation, but part of that value is probably that people think it will eventually get swallowed up by one of the major defense contractors like Raytheon. And since it's in the US, it's probably limited in who it can sell drones too without the government's permission. DroneShield is an Australian company and they make a counter-drone jammer device, but since it's not in the US, they probably have more people that they can sell their tech too without government interference. Unfortunately, it's trading at too high a price for my taste also.

@KJP it looks like IESC has tripled this year, so I wish I started looking for this stuff sooner. I still don't know exactly how to play it, but the growth in residential solar and other types of green energy like wind means that the grid is going to get traffic from places and times that it wasn't designed for. Since people keep adding solar, the transformers will be working not just stepping down power to the home, but stepping it up from the home to the grid. I think that means that these already older transformers that people don't upgrade until they fail, because they don't want to pay for it, may get worn out quicker. And they already getting harder to source. https://www.energy.gov/oe/articles/doe-and-industry-team-keep-lights-america The lead times for transformer orders, particularly distribution transformers, increased from three to six months in 2019 to 12 to 30 months in 2023. So I don't have a great idea yet for how to play this, but it seems like there is going to be a way to get in some of the niches where there isn't competition. Or possibly a small company that makes an important part of a larger item, where a price increase would be very profitable to the small company, but not even noticed by the total price of the project. I don't know what that is yet, but I'm looking for it and I hope I'll know it when I see it.

Teledyne's imaging business is about 55% of revenues, but it's declining. They have a drone business that is growing 30% a year, but it's one of those great businesses that is stuck inside a terrible business. It doesn't look like a bargain, and if it was, you would think you'd be able to find at least one insider who was buying, instead of cashing in and selling out their shares as soon as they get them: TDY - Teledyne Technologies Inc - SEC Form 4 Insider Trading Screener - OpenInsider Teledyne Technologies Incorporated (NYSE:TDY) Q1 2024 Earnings Call Transcript (yahoo.com) Cool drones though

Since he likes good companies with a bad balance sheet, I wonder why they don't make an offer on Nextera Energy Partners. SunEdison used to put together solar projects and drop them into a controlled and publicly traded subsidiary called Terraform which would pay investors a fixed return on the assets. NextEra does the same thing with Nextera Energy Partners. Higher interest rates and higher costs from inflation make it harder to put those deals together. But Berkshire Energy is big in the renewables sector, and they have a fortress balance sheet. They can use that to buy these assets which already deployed or fund new ones. I know he's mentioned before that he's not interested in Mars, the candy company. But Mars also owns pet food companies and now a chain of Veterinarian hospitals (Banfield) and pet insurance. Even if you don't like the low end candy business, the pet side of the company looks interesting. Mars is a private company and the brothers who are running it now are competent, but they won't live forever and word is that competence looks like it's skipped a generation in the people who are supposed to inherit the business.

This is a powerful business model. I noticed it in companies like Walmart (and now CPNG) that sell quickly and pay suppliers slowly and it gives you free float that you can use. As long as the business grows, so does the float. Some companies like Amazon and Apple (last time I checked) also have this, which makes it incredibly hard to compete with them since their cost of capital is negative (up to a certain amount). I didn't realize that SBUX had so much customer cash. It's kind of BS that they get to keep it. Banks and others have to turn abandoned money over to the state (escheatment) and the person can claim it or the state keeps it. Seems shady that once you charge up your SBUX card you can only spend it or lose it.

Droneshield is a $475mm market cap Australian company in the drone market. It's 8x sales, so it's probably just in the watch pile, but I'll add the name here in case I find more names and maybe one of them will be interesting enough to start a separate post.

The long answer is that in an economics class I took, the book had a bunch of puzzles to try to figure out such as "why is popcorn so expensive in movie theatres?". One of the puzzles was that land is so expensive in Manhattan that it's much more profitable to build a tall building than a shorter one. So why aren't all the buildings in Manhattan the same size?* I was only nibbling before because I hadn't applied for margin, so I was 100% invested and only buying when I trimmed something else. Now that I have margin, I'm about 105% long. So I don't mind buying more at better prices up to a point. The catalysts (new switch, Nintendo theme parks, new movies) are still in the future it's entirely possible that I might it better at a higher price if things go according to plan. *the answer to the puzzle is that different owners have different costs of capital, so I might only be able to borrow enough for a 12 story building instead of a 50 story building like my neighbor. So you have to take into account your costs of capital and your opportunity costs (what if I sell the land to a developer) when you make a decision.

I am out but I recently added margin to my trading account so I've been able to buy some more without selling. It's a mixed blessing because I think I've been sloppier buying and my broker charges outrageous fees for margin. I don't think I would ever do the maximum allowable margin, but I think if I can buy something that outperforms the 12% interest rate, it will be okay. The way I'm trying to think about it (which probably isn't the mathematically optimal way), is that if I have, say, $12k in dividends coming in 2024, then I would feel comfortable with $100k in margin ($12k interest). That would allow me to buy stocks that look promising, and I would get to keep the appreciation, but the fees from margin interest would offset the taxes I have to pay on the dividends that came in the stocks that are already in my portfolio, but which I don't want to sell.