Student of business models. Player of infinite games. Lets build something together.
Nashville / NYC
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6 case studies per former Ruane, Cunniff, Goldfarb analyst on performing scuttlebutt research, developing real world contacts & personal relationships, where to focus your questions & time, etc. ht FinTwit
dropbox.com/s/c8qxz7fefjx5nj…
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Im looking for a job at either a family office or an investment fund. Most interested in team, culture, learning, mentorship; less interested in title, money. Resume pictured. Appreciate your help connecting me with the right group. #retweet
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How Im prioritizing
1 Management
2 Culture
3 Balance sheet
4 Cash generation
5 Moat
6 Reinvestment
7 Secular industry growth
8 Recent price decline
9 Valuation
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Munger compilation: shareholder letters, annual meeting notes, noteworthy articles dropbox.com/s/d9o5gk2hsy594d… … ht @ racemize
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Druckenmiller: "I think we're in one of the biggest productivity inflection booms since the late 1800s. I am very confident that it is not being measured in real GDP."
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The Luxury Strategy = best book I read in 2018. A tour de force on product marketing, brand strategy, failures & successes of current players. An equally valuable book for an operator as for an investor.
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Dorsey Q&A on moats and how the appearance of value creation has shifted outlookbusiness.com/specials…
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“The single most powerful pattern I have noticed is that successful people find value in unexpected places, and they do this by thinking about business from first principles instead of formulas.” - Thiel
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Moats evolve with opportunity set. Intangibles replaced tangible assets as primary value creation source. Thus, barriers to scale became more impt than barriers to entry. Culture is now the leading competitive advantage for firms. Structural (in)ability to adapt = newest moat.
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Brief primer on essentially every successful business model in operation today fourweekmba.com/what-is-a-bu…
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Buffett on the importance of return on incremental invested capital, prodded by one of FinTwit's finest (@AlexRubalcava) ht @jtkoster
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Why is focus on competition, not customers, pervasive? 1 MBA schools trained this generation of CEOs to do so 2 competitive data can be both attained + measured 3 understanding change in customer preference as it is happening requires non standardized, non spreadsheet-able effort
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The best interview question I've been asked - "Who is your investment hero & why?" Explains so much with so little, just like a key kpi for a company. Ht TK.
What's your answer?
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"We’ve passed a milestone in Google’s evolution from search engine to walled-garden." sparktoro.com/blog/less-than…
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The next Big Short = higher education. 50% of US colleges will close their doors over the next 10-15 years. perell.com/blog/what-the-hel…
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What are the best investment newsletters? What unique content, curation, or viewpoint make them most useful?
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Interesting collection of value for Michael Burry... 1st time he's filed publicly in 9 quarters; housing, lodging, consumer internet, healthcare, gaming, Disney sec.gov/Archives/edgar/data/…
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Weekend reading: 100 heuristics to make you a better investor & person linkedin.com/posts/tkamei_10…
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Andreessen: "Do financial markets understand [tech enabled network effects], to degree they should, after all this time?"
Brian Arthur: "No. Look at Buffett. This is not general knowledge among investors yet"
Andreessen: "Smartest HF manager I know calls this 'NY/PaloAlto' arb"
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What is your pattern recognition to identify companies whose future business quality will likely be materially higher than their current state?
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Dont think Ive ever seen Hempton, Gundlach, Bass, and Cohodes all bullish at the same time
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Fantastic Q&A transcript w NZS Capital on investment qualities they look for, portfolio construction, etc w commentary on APH, ARM, GWW, AAPL, cloud, TXN, ASML, trade war game theory, where disruption is coming next
Must read via @TheStockPodcast
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Buffett breaking down some very important concepts via KHC example
1) returns on tangible capital (core business quality)
2) returns on total capital (what you pay as an investor)
3) importance of reinvestment opportunities (what drives future value)
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Framing is so important for an investment thesis, ie what are the 2-3 things we are really betting on. Starting from the customer perspective is one of most consistently accurate ways to ensure your framing is correct.
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2019 Sequoia Fund investor day transcript sequoiafund.com/Download.asp…
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Reinvestment opportunity is the last criteria I consider, probably spend the least time understanding, yet is the most important in determining investment outcome.
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Incredible collection of book reviews blas.com/library/
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Sequoia 2018 investor day transcript ruanecunniff.com/Download.as…–_Investor_Day_Transcript
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Per request, a list of "growth bonds"
- Steady history of dividend increases + expected future increases
- Low disruption / obsolescence risk
- Upside optionality per good mgmt, capital allocation, unlevered balance sheets
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"Complexity Investing" whitepaper: a focus on "companies that are adaptable, long-term focused, innovative, possess long-duration growth, and maximize non-zero-sum outcomes" ht @iamschoeb
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My evolving screening framework
At the center you find companies like Brookfield, Brown-Forman, Comcast, Heico, L'Oreal, Microsoft, Rollins, RPM International, Watsco, WR Berkley
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Rochon: "the only thing that prevented me from investing in SBUX 23 years ago was the P/E ratio... it was trading @ 40x earnings... and its up 100 fold since then"
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The worst lesson young value investors have learned = "Stay inside your circle of industry competence." But its not WEB's fault; its simply a misinterpretation. "Understand your current circle of competence" /= "Keep your existing competence static & do not attempt to grow it."
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Template for modern success as an investor. Develop unique insight earned from hard work leading to outperformance from smart risk taking. First principles not forced conventions. moiglobal.com/ram-parameswar…
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Viewing the investment funnel like this, my excuse=each of the 5 filters above reinvestment need to exist before reinvestment can be evaluated. For most companies, you never get past filter #2 or #3, thus spend least time thinking about most important determinant of success.
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Highest returning companies of the prior ~50 years (1962-2014) via @chriswmayer's wonderful study
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How much information is enough to make an investment decision? Thoughts from @IntrinsicInv via investingcity.org/podcast/ep…
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Dont buy something that is derivative of something else. Figure out what you are betting on and make that bet as directly as possible.
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CHTR is a fat pitch
1 low risk of tech obsolescence ("its just physics")
2 irreplaceable asset base
3 growing demand for service
4 >cust value prop / untapped pricing power
5 best mgmt team in industry
6 board controlled by one of best living investors
7 valuation = 8x 2020 fcf
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Wife: benefits people are here & employer is now offering a 1:1 match for...
Me: max it
Wife: ...my 401k. But what about...
Me: max
Wife: ...are you sure?
Me: max it the fuck out
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Just about any public co in aerospace, defense, spirits, coatings, HVAC, med device, towers, payments, info services has consistently grown over time & generated abnormally high ROIC. One could pool all of these comp sets together, throw a few darts, & likely outperform market.
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Credit ratings, coatings, payment network, futures exchanges, customer reported data repositories, industry systems of record, shared internet/telco infra, airports, luxury brands (spirits), content that recreates itself (Disney), waste removal, franchisor
What companies make your list of The World’s Best Businesses? (Forget about the share price for a moment—imagine they’re all private.) Why those companies?
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Market is paying up for perceived resilience while avoiding optionality. Probably a good time to collect portfolios (ie companies) of free upside options.
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AMZN free cash flow
"Last quarter it took Walmart on average two days to receive payment for goods after it paid its suppliers, while Amazon on average received payment 20 days before it paid its suppliers."
vox.com/recode/2019/8/21/208…
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Applied value investing: spend $50 on a nice lunch to capture one hour of a smart person's time that usually 'bills' at $500-$1,000 / hour
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"All of AWS' profit is funding the remainder of Amazon's growth. With Tencent, their games platform is funding their overall growth. Like Amazon, Tencent is intentionally underearning, and both of their LT growth looks incredible." - Druckenmiller
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20th century infrastructure was physical, non profit, government owned, & depreciated with usage. 21st century infrastructure is digital, for profit, publicly traded, & appreciates with usage. Today's market captures an enormous, high value opportunity set that 1950 did not.
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"Finite players need training. Infinite players need education. If you play life as a finite game, you train for the rules. If life is instead an infinite game, you focus on being educated to adapt to unknowns." fs.blog/2020/02/finite-and-i…
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2nd edition of the Outsiders:
TDG, NFLX, LVMH, BAM, DHR, CPRT, NVR, CSU, DPZ, MTN, ICE, IAC
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“An esports franchise is a license to print money. The stadiums cost no money... expenses are nothing but revenue potential is unfathomably large due to scale of the eyeballs. If I was 15 years younger I would sell everything I own to buy one.” Mike Francesa ht @michaelbatnick
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Checkout our new podcast when you're bored this weekend. We cover owner operators, how to research a new industry, investing mistakes, food delivery (Grubhub / DoorDash / Uber Eats), Sherwin Williams, Ecolab, & Equinix.
investingcity.org/podcast/ep…
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