This Week I Learned #96

“Go to bed smarter than when you woke up”
— Charlie Munger

2020-03-30

  • Amazing view on buying and holding a stock during a downturn by Peter Lynch of Magellan/Fidelity.

    • It doesn’t matter if someone bought $20K of the stock at $50 and if you bought the same stock for $3 by putting in $20K. Both people can lose all their money when it goes to 0.

    • When the stock continues falling, only those who actually know the business, understand it and know why they bought it can hold onto it as it falls and falls and falls. 

    • Past highs are not a reason for a stock to go back up to that point. It never has to get back to that high. Don’t forget that. 

    • https://www.youtube.com/watch?v=JVvwCkB-JLE&feature=youtu.be

2020-03-31

  • “Companies that obsess over what their competitors are doing are doomed to mediocrity” - Eric Schmidt and Jonathan Rosenberg in 'How Google Works'

2020-04-01

  • Learnings from Rochon’s Giverny Capital 2019 letter:

    • What I love about the letter is the part where Rochon lists all the events that took place in the last decade as well as the major mistakes the fund has made. Whether it’s a 7x return in 8 yrs for Microsoft… a business of 125bn mkt cap to 1tn or Remed from 1bn to 20bn mkt cap for 20x over 16 yrs or Copart from a 2.5bn company to as high as 20bn in 2020… over 9 yrs. A perspective on how companies can grow to astronomical sizes and how you’ve got to hold your investments for a long time to get rewarded. 

    • The fact is….. wonderful businesses will compound. Even if you don’t find them at the smallest of values… and sometimes it will appear harder to see the diamond but as time passes… things get clearer… it may get clearer for everyone else too… but it’s for those who can execute and hold.. 

    • Here are some of the geopolitical and macroeconomic events that took place during the last decade:

      • The anti-stock-market movementof “Occupy Wall Street” (2011)

      • The downgrade ofAmerican bonds (2011)• Financial crisis in Europe, particularly in Greece (2011)

      • The debt ceiling crisiswith the US government(2012)

      • The “fiscal cliff” in the US(2012)

      • The start of the conflict between Russia and Ukraine (2013)

      • Lawsuits by the US government against largebanks (2013)

      • Oil price collapse (2014)

      • Economic slowdown in China (2015)

      • Brexit (2016)

      • The trade conflict with China (2018)

    • “Strangely, the two bear markets -a 20% drop in the stock market in2011 and 2018 are often overlooked. I called these“ghost bear markets.”

    • http://www.givernycapital.com/en/doc/236/Giverny_Capital_-_Annual_Letter_2019_web_.pdf

2020-04-02

  • Learning from Howard Marks’ memo:

    • When everyone goes to cash… that’s probably near bottom. When people are done telling and are in their most liquid positions. Markets dipping and rebounding indicate we have yet to hit absolute points of pessimism. Optimism exists. 

    • "What do we know? Not much other than the fact that asset prices are well down, asset holders’ ability to hold coolly is evaporating, and motivated selling is picking up."

    • "“The bottom” is the day before the recovery begins.Thus it’s absolutely impossible to know when the bottom has been reached . . . ever."

    • "The more you want to garner potential gains and don’t mind mark-to-market losses, the more you should invest here. On the other hand, the more you care about protecting against interim mark downs and are able to live with missing opportunities for profit, the less you should invest."

    • "But is there really an argument for not investing at all? In my opinion, the fact that we’re not necessarily at “the bottom” isn’t such an argument."

    • https://www.oaktreecapital.com/docs/default-source/memos/weekly.pdf

2020-04-03

  • Learnings from awesome interview with legendary short-seller, Jim Chanos:

    • "I think two areas are really areas to watch out for. The first is the fraud, I think the fraud that’s hiding in plain sight, which is the aggressive and over aggressive use of metrics rather than gap earnings. We see it particularly in the lavish use of share based compensation in Silicon Valley. But everywhere where people simply are paying employees with stock and adding it back to pro forma earnings, anyway you cut it compensation is an expense. It should be expensed whether paid in stock or cash. And then I could go on with all the adjustments to EBITDA in the private equity space. We don’t have time to get into all that but…"

    • Shorting the gig economy (Uber, Grubhub), Tesla, Chinese companies (Luckin), QSR 

    • Just consider what happens to all the companies that require the use of gig economies but will they get bailed out by government or receive any aid when the organization took advantage of not having as much full time employees? 

    • Or franchiser businesses where they skim off the top of their own franchisees who are levered and will be suffering when the economy craters….. 

    • Avoid frackers => they are a scheme of incinerating capital. 

    • https://www.youtube.com/watch?v=StybwIP8O8k

 
Daniel LeeOMD VenturesTWIL