This Week I Learned #97
“Go to bed smarter than when you woke up”
2020-04-06
Interview with Steven Wood of Greenwood Investor on the importance of value and fishing where there is no competition.
An investing philosophy that is a mix of i) deep value, ii) quality of business (conscious capitalism), iii) that is hated.. and is a mix of those factors to generate alpha
It’s not about just sitting on your ass and buying quality ignoring price… no. You can’t forget that you need to buy an investment at a very cheap price for the top quality.
2020-04-07
Learning from Chuck Akre’s 2020 Q1 letter: "Instead of shocks, we think about “shock absorbers.” And the three best we know of are: 1) owning exceptional businesses, 2) paying reasonable valuations for them, and 3) building cash when paying reasonable valuations proves elusive."
2020-04-08
Focused Compounding podcast’s fascinating look at buyback yields and why it’s a mistake to look at historic EPS growth for companies that grow primarily on reinvesting into the business via buybacks.
Also looking at the cash availability of companies during crunch time…. considering accounts payables and deferred revenues to consider the actual cash amount a company would have during a recession when revenue is 0… as well as the accounts receivable to see if they are ones from large profitable players who will pay back or if there will be a halt on the AR as well.
2020-04-06
Presentation by Chris Mayer on 100-bagger companies and their underlying qualities.
Owner-operator: Meaningful stake of 10-20% at least by management. See the proxy. They tend to outperform their hired gun counterparts as a group
Start Small. Not tiny but small enough.
Growth, growth and more growth.
Low multiples. 3x FCF kind of low because price matters.
High returns on capital. As Munger says, it’s the ROIC of the business that will determine long-term results.
Ability to reinvest for magical flywheel effects. Ability to widen the moat.
You need to really know the business because these companies can go nowhere for long stretches (Amex, Texas Inst.) and/or drop 25% in a single day (Netflix)
Focus on the business, not the price, when deciding to sell.
Companies with 55%+ gross margin (GM) tend to keep it. High GM is predictive
https://www.youtube.com/watch?v=KoOEE8GI-Ko&list=WL&index=5&t=1130s
2020-04-06
An interesting site to see various data, including coronavirus related stats instantly. I’ve been using this to see which countries are ‘flattening the curve'