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Leon's avatar
$18.9m follower assets
1.000 substack subscriber
1 year ago I started my substack https://underfollowedstocks.substack.com and I just surpassed 1.000 subscribers! Thanks to all subscriber and of course a special thanks to the two people that voluntarily chose the paid plan to support me, I really appreciate it! :)

A big thing thank you also to the fantastic writer that are recommending Under-Followed-Stocks :) Give them a follow & subscription!
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Is e-commerce a good business?
$AMZN retail has scale and distribution advantages over other e-commerce players, yet is still unprofitable. How are the 2nd through 10th strongest players in e-commerce supposed to compete? How long will it take the industry to consolidate and for e-commerce as an industry to have positive margins?
I think Amazon eCom business is highly affected by investments in the delivery network. I don‘t see real margins for Amazon in the core eCom business, but more in the marketplace & delivery service business. Companies like Etsy or InPost that are focusing on these businesses are able to be highly profitable. But also companies like Revoltion Race ($RVRC) that only focus on a eCom D2C business while building a brand are able to show good margins in their business. But Amazon itself will not be able to build such a brand imo
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Samuel Meciar's avatar
$36.1m follower assets
$GOOGL Google Cloud announced a new partnership with Anthropic, an AI startup focused on safety and research. Anthropic has selected Google Cloud as its preferred cloud provider, giving it the computing power necessary to build reliable and trustworthy AI systems. Additionally, Google Cloud intends to build large-scale, next-generation TPU and GPU clusters that Anthropic plans to use to train and deploy its cutting-edge AI systems.


Lifco Q4 22 Earnings recap
First off, if you liked this post, I also posted a recap of some other holdings of mine on my substack. These are less detailed recaps though than this Lifco post.
$LIFCO is a Swedish Serial Acquirer in the Dental, Demolition tools and System Solutions space and has been a part of my portfolio for around a year. The company just reported Q4 results.
Net Sales grew 21%%, with 9.5% organic growth (keep in mind all values are in Swedish Crowns), with EBITA growing significantly faster at 30.5%% at a 22% margin. Operating Cash flow accelerated by 50% and is higher than EBITA at a 25% margin. Lifco is one of the few companies that always reports and highlights their Return on Capital Employed, both with and without factoring in Goodwill. ROCE continues to be strong at 22.6% and 135% excluding goodwill.

The music continues to play in the Demolition and System Solutions segments for Lifco with strong 20-40% growth in sales and EBITA across the board. The Dental segment has been struggling a bit for a while with lower growth and margins. It is still a good business at an 18% EBITA margin, but definitely lagging behind. Maybe we could see a $DHR situation, where the underperforming business is spun-off? I find it highly unlikely due to Lifcos focus on being a long-term owner. I'm not sure if spin-offs would break that rule?

Lifco offers a strong combination of organic and inorganic growth, seeing EBITA CAGR of 12% from acquisitions and 8% organically. At a 1.5x net debt/EBITDA the company also has a good balance sheet and can lever up if they find good deals exceeding FCF.

To conclude: I continue to be a happy Lifco shareholder and should probably buy some shares again sometime...sadly I didn't add in the last months when prices were cheap.
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Jennifer's avatar
$26.1m follower assets
Tuesday Night Twitter Spaces
I'm thrilled to be asked to speak about mining and metals at Nyetgoldblum and Jleqc's "High Energy Tuesday" Twitter Spaces (4:30pm MST on Feb 7).

In addition to discussing my favourite topic, the value of SEDI, I will be speaking about the Lassonde Curve. If you're investing in junior miners, it's a tool you should familiarize yourself with.

I am often asked about the impact a recession could have on metals & mining. I came across this fabulous article today from White & Case, which covers inflation, deflation, and other risks that commodity investors need to be aware of in 2023.

The key quote I hope folks will take away from it:

Sector participants need to maintain the long view to put themselves in the best strategic position possible regardless of where the global economy goes in the next 12 to 18 months.

Definitely a recommended read; at 16 minutes it's a lengthy piece but well worth you time.

I hope Tuesday night you will find that I was worth some of your time too!


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A Further Exploration of Disney
I posted a while ago about Disney's response to Nelson Peltzs' Restore The Magic but I have since made a whole video exploring both sides. Taking a look at both Restore The Magic and The Current Board is the Right One For Disney I had some thoughts.

I enjoyed this watching this entertaining segment !
As a multi-decade holder of $DIS shares, what we thought was really astounding was the relative drama-free period between 2005 to 2020 when Bob Iger was CEO. Even the board of this entertainment behemoth seemed quite functional during his tenure.
Many of us will still remember the absolute chaos that was the latter part of Michael Eisner's tenure. There was poor corporate governance, drama over the ousting of Roy Disney from the Board, theme parks that were a major drag on earnings, an animation division that was starting to pump out generic, derivative content, the costly Michael Ovitz saga and even poor succession planning reared its ugly head just like it has today.
We're not surprised we find ourselves in a time of Board disruption and operational challenges. That seems to come with the territory with media conglomerates. But despite all the drama and strategic missteps, there's one fundamental fact that always sees the company through difficult times: the enduring nature of its multi-generational content. One could argue that Iger dramatically expanded Disney enduring franchise content and this has put Disney in a much better position than it was back in 2005 when Eisner was ousted. That's what existing shareholders have to hang their hat on. Despite the strategic and operational challenges this business faces, it will eventually make it through the other side because of the strength of its intellectual property. We just have to endure all this drama until the business finds firm footings again.
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MT Capital's avatar
$27.3m follower assets
Why Don't We Ever Learn
My latest substack piece can be found below! https://mtcapital.substack.com/p/why-dont-we-ever-learn

“There is no new thing under the sun.” - Ecclesiastes 1:9
Humankind has made irrefutable technological process during our short tenure on this planet. We have manipulated the elements around us to propel ourselves to the top of the food chain, bringing with it a comfort of life and a plethora of capabilities that would’ve been thought impossible to our forebears. Despite this ingenuity, human nature has changed very little. Our biological makeup is nearly identical to those that traversed the earth before us. Our behaviour patterns, though disguised in niceties and etiquette, still draw from animalistic tendencies. We’re still plagued by the compulsiveness, greed and naivety that has gripped members of species since the beginning of time. Human nature really hasn’t changed.

We have all heard the aphorism that if we fail to study history, we are doomed to repeat it, and this holds even more true today. As our world is ravaged by war, as financial market participants are duped by fraud, as the stories with the same plot repeat themselves with an almost uncomfortable frequency, one has to wonder - do we ever learn?
I don’t have the answer to that question, nor will I try to pretend like I do. However, during my time trying to understand and participate in financial markets, I can’t help but notice how frequently large-scale frauds seem to occur.
Take ponzi schemes as an example, these heinous financial entities perpetrated by downright evil actors have victimized thousands of individuals across hundreds of years. Many would trace back their origins to Charles Ponzi, a man that defrauded an abundance of investors with promises of being able to generate 50% returns in 45 days. However, despite the importance of these events, and the name of the schemes since being attached to this bad actor’s name, there are actually earlier occurrences, ones that can be traced all the way back to the 1800s.

Arguably the earliest documented case of a ponzi was in Bavaria in the late 1800s. Our villain in this story is Adele Spitzeder, a German woman that turned to financial crime after retiring from a semi-successful career as an actress in the 1860s.

Accustomed to living a fairly luxurious lifestyle, when her income from her previous occupation approached the zero bound, she embraced the art of the grift rather than trying to cut expenses. Similar to Ponzi, Spitzeder devised a plan - concocting a recipe for an investment opportunity that promised to pay an unrealistic but enticing 10% per month. At the end of 1869, Spitzeder found her first victim, webbing her in with tales of spectacular potential riches. Enticed by her charm, this working class woman decided to invest, handing over 100 gulden to Spitzeder. Ruin was not instantly met. A short time later, the investor received 20 gulden back from Spitzeder, with the promise to receive a further 110 gulden three months down the line. As you might imagine, tales of spectacular and expedient profits rapidly spread, and Spitzeder quickly received investments from hundreds of people, mainly members of lower income classes who did not know any better. This demand was almost downright insatiable and soon, out of necessity, Spitzeder decided to open a bank in order to keep the scheme afloat - Dachauer Bank was formed. Like other entities set up to help sustain a fraud, their operations were all a front. Accounting procedures were minimal, and the deposits of incoming investors were stashed under floorboards, hidden in cupboards, and stored in other manners that were not befitting of a well-run financial institution.

Even despite operating in a manner that would give any auditor a heart attack, growth continued. The bank started to employ hundreds of contractors to keep the day-to-day running smoothly, was speculating heavily on real estate purchases, and was drawing an abundance of deposits away from Bavaria’s legitimate banking operations due to the high interest it offered (despite stealing customer principal). Withdrawals from legitimate banking operations to Dachauer bank eventually became such a problem that government officials took notice. The Minster for Upper Bavaria started to note the unusually high withdrawals that were being made from neighbouring banks, and became concerned with both the legitimacy of Dachauer Bank’s operations and how they were able to offer such enticing returns, as well how these happenings could potentially cause ripple effects through the rest of the economy.

Fearing economic calamity, government entities quickly worked to steer the ship right. The Interior Ministry placed ads in newspapers, warning customers not to invest, and the Munich police denounced the bank’s fundamental soundness - actions that added more fuel to the fire as investors deemed this a coordinated effort to deter working class individuals away from fantastic investing opportunities.

It didn’t help that Spitzeder’s philanthropic endeavours were widely cherished. Though financed with stolen money, she had opened nearly 12 soup kitchens, actions that not only elevated her in the public sphere, but also in the eye of the media. Coupled with the fact that she had also extended enormous loans to a plethora of newspapers, she was able to largely control the narrative.

Despite all of this, the hunches of competitors and government officials, coupled with the organized efforts of the courts to synchronize an enormous withdrawal of depositor funds, eventually lead to the bank’s demise. In 1872, after a group of 760 individuals demanded large sums of their money back, Dachauer Bank went under, unable to meet withdrawal requests with cash they had on hand. Shortly thereafter, the true nature of the bank’s operations were uncovered, and Spitzeder was sentenced to a measly 4 years in prison (by exploiting loopholes in the Bavarian legal system) for running one of the biggest frauds in history at the time, swindling an estimated €430M euros in today’s money away from investors.

Flash forward more than 130 years, despite undeniable progress made by our species in almost every field, a similar situation happened. Madoff likely needs no introduction. The man is getting a lot of resurgent attention of late due to the newly released Netflix docuseries, and for good reason, he perpetrated one of the largest frauds of our generation, one that infiltrated financial infrastructure to the very core, and showcased how fragile, poorly operated, and ripe for exploitation our systems are.

Madoff essentially operated in two spheres - one legitimate and one displaying all of the hallmark traits of a typical ponzi scheme. His brokerage firm on the legitimate side of things was rather impressive - technology that was created in-house was responsible for early foundations of the Nasdaq , and by the late 90s the man was processing close to 20% of the trading orders on the New York Stock Exchange. This prowess brought with it admiration and respect - Madoff operated in commendable circles, sitting as a chairman of the National Association of Securities Dealers, swaying regulatory direction with his interactions with the SEC, and more. In addition, similar to our predecessor outlined earlier, Madoff was known for his philanthropic side and sway outside of finance, existing as a major contributor to a plethora of charities and to the Democratic party of the United States. On the illicit side of things, Madoff wasn’t so rosy. Madoff Investment Securities also operated an illegal quasi-hedge fund/advisory business, one that leveraged ponzinomics to its benefit. The scheme was relatively straightforward. Madoff collected funds from clients with the promise of steady profits, displaying past results that showcased consistent performance to draw them in, often marketing a fake option “collar” investment strategy to the more inquisitive potential investors.

These claims were of course malarky. What Madoff was instead doing was depositing inbound client funds to a Chase Manhattan Bank account, paying out “returns” to early investors by using the money obtained from later investors. Though simple on paper, Madoff employed a host of individuals to spin a false web of sophistication around these happenings, with some employees spending hours a day fabricating documentation that outlined the firm’s fake trades. In reality however, the fund relied on a constant inflow of capital to keep the operations going. Old investors could be paid out consistently as long as new investors kept coming in. However, when the GFC hit and the music stopped playing, trouble emerged. In 2008, when the redemption requests started to hit, Madoff Investment Securities was unable to cover these withdrawals with the cash they had on hand. The scheme was then unearthed, Madoff was arrested and was sentenced to 150 years in prison for his actions. Madoff would later die of natural causes in prison last year.

Take Sam Bankman-Fried as another example. Although FTX was arguably not operating an identical scheme to Spitzeder and Madoff, his ascent shares many similarities. The since disgraced cryptocurrency figure started Alameda Research in 2017, a crypto hedge fund that rose to fame as a result of its supposed exploitation of the “kimchi trade” opportunity. In essence, due to the restrictive nature of the South Korean Won and Japanese Yen currencies, crypto that traded on exchanges housed in these geographical areas traded at a slight premium in comparison to other parts of the world. Traders could exploit this arbitrage opportunity by purchasing crypto in other areas, and sell it on South Korean or Japanese exchanges to capture the spread. Alameda Research supposedly just did that, garnering massive amounts of profits and growing their AUM spectacularly in the process.

This newfound scale, in conjunction with the relatively underdeveloped nature of cryptocurrency infrastructure at the time, spurred SBF to pursue another venture simultaneously - the creation of a cryptocurrency exchange FTX. The endeavour made sense on paper, you had a trading firm on the left that wanted their trades to be executed in a better manner, so why not create a cryptocurrency exchange on the right that was capable of doing just that? The supposed technical prowess of the newly formed entity made its way into the mainstream crypto sphere, and the geeky nature of Sam quickly fooled investors into he was the next misunderstood tech genius that would bring with him swaths of riches. Venture capitalists, pension funds and other supposedly sophisticated investors participated in the nearly $1.8B in funding that FTX was able to obtain over the course of its short lifetime. With central-bank induced liquidity spurring on the most irrational of exuberances across markets, the FTX valuation soared in conjunction with the lofty ambitions for the cryptocurrency ecosystem as a whole, reaching almost $40B at its peak. Hoards of cryptocurrency hedge funds, cryptocurrency enthusiasts, and mom and pop investors deposited their assets on the platform, a value that reportedly reached approximately $16B at its peak. SBF started to become revered by mainstream media. His philanthropic endeavours resulted in many stating SBF was going to change the world. Even after the monumental scandal was uncovered, the Wall Street Journal still had the audacity to tout how fraud ruined the man’s plans to save Planet Earth:

In addition, SBF was also consistently lobbying with politicians to bring regulation to the crypto space, and was the second largest contributor to the democratic party ahead of their most recent election, next to the legendary George Soros.

Monumental ascent aside, the descent was even more spectacular. Giving WeWork a run for its money, the evisceration of valuation and capital was truly astounding. Spurred on by a piece created by Coindesk that speculated that FTX’s balance sheet wasn’t as solvent as some might believe, as well a social media storm created by Binance outlining that they were selling their holdings of FTX’s native token, a bank-run-esque situation came into fruition.

In essence, these happenings outlined the fact that a key component of FTX’s balance sheet was made up of their native tokens, FTT. Put simply, the company created, out of thin air (using code), “assets” that were at their core inherently worthless, but after being touted to the masses during FTX’s phenomenal rise, saw an equally remarkable trajectory upwards. Marking these tokens to market allowed for FTX’s asset position to be bolstered significantly, which on the surface may have resulted in the company appearing solvent when in reality this was far from the case.

Spurred on by the aforementioned media frenzy that occurred in the latter half of last year, investors started to run for the doors. Similarly to other financial schemes, once it was found out that the company did not have the sufficient assets to pay back their customers, they quickly went under. Shortly thereafter, FTX was arrested in the Bahamas and is now on trial, the outcome of which will be very interesting to monitor going forward.

Spurred on by the aforementioned media frenzy that occurred in the latter half of last year, investors started to run for the doors. Similarly to other financial schemes, once it was found out that the company did not have the sufficient assets to pay back their customers, they quickly went under. Shortly thereafter, FTX was arrested in the Bahamas and is now on trial, the outcome of which will be very interesting to monitor going forward.

Frauds like these are bound to continue to occur. Investors would be best served to extensively research any and all investment opportunities they participate in, and remember that if something sounds too good to be true, it almost always is. Although focus on the present moment is undoubtedly important, the study of history ensures we are not duped by the same tactics of the past.
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Uday's avatar
$95.3m follower assets
Blackstone's Q4 results - Trickling back to normal
As I mentioned here recently, Blackstone’s success over the last decade has been driven by its ability to raise an increasing amount of funds across its business segments, convert a larger part of its AUM to perpetual vehicles (raise longer-term capital which means longer duration of fee revenues) and increase earnings stability with a higher proportion of it coming through a more stable fee revenue on AUM.

It has unlocked various sources of capital which it can rely upon for for deployment, generate returns and use the performance to attract more inflows. When the cost of capital was low and financing was dirt cheap, institutional investors were increasingly allocating more towards private markets. The wealthy investor was also looking for alternative sources of returns outside the traditional equities and fixed income, some of which could be found here.
But as the market turned and the fear of recession loomed with much higher interest rates, one would naturally expect inflows to slow down for a business like BX after record breaking fundraising years during 2020-21-H122. Not just yet.

BX Quarterly inflows. Source: Company data

Inflows this quarter were still quite robust at $43bn, taking the 2022 total to 226bn. AUM is now at a record high of $975 billion, up 11% YoY. Fee-generating AUM is now at $718bn while perpetual AUM was up 18% YoY at $371.1bn, now making up more than 32.5% of total AUM.

BX AUM by segment. Source: Company data

BX deployed $18.7bn in the quarter and $120bn for the year, and realisations (investment exits) were $13.5bn in the quarter and $81.8bn in the year.

Annual deployments and realisations. Source: Company data

For context - BX raises AUM, earns a management fee, deploys the AUM, realises the investments and takes a performance fee off the realised investment returns.

Fee related earnings (Fees - fee expenses) were $1.1bn for the quarter, down from Q4 last year but up for the year at $4.4bn. FRE margins continued to expand and are now at 57.1% (from 56.3% in 2021).

Fee-related earnings. Source: Company data

Expanding margins at higher fee revenues is a good sign. Source: Company data

Net realisations (performance fee - compensation) were at $3bn for the year but down more than 60% for the quarter on a YoY basis (less liquidity and higher rates → tighter financing, lower buyouts and falling valuations)
Post-tax distributable earnings (Fee earnings + Net realisations, the cash flow for shareholders) grew to $6.6bn. The DE has a 3 year CAGR of 32%.

Distributable-earninigs have grown at a CAGR of 32% over the last three years

BX declared a dividend of $4.4 per share (which has grown at a CAGR of 10% over the last 5 years and 20% over the last decade) and now has returned $1.1bn in the quarter with over $6.1bn in the year. That’s over 90% of its distrubutable earnings returned to shareholders.
The stock is up 32% this year already, but is still down 30-35% from its high.

BX vs SPY YTD returns. Source: Koyfin

Valuations are down from its highs too, but it is not as cheap as it was just a few months ago.

LTM Price/DE and Price/FRE multiples

Both fundraising and realisations are likely to slow down going forward, which would be a headwind for AUM growth and fees. However, it still has $187bn of dry powder (committed but not invested capital) available for deployments, which might allow it to invest at lower valuations and enhance its future investment returns, and thereby its performance fees.
The management struck a defensive tone during the earnings call realising the macro headwinds and a slowdown in fundraising and investing environment. If it can navigate the outflows from perpetual funds well, the Raise → Deploy → Return → Raise cycle still looks on well on track, albeit with a slower pace of change from one step to the next one.

---------------------------------------------------------------------------------------------------------------------------------------------------------

I also published a post discussing Blackstone ($BX) here.
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StockOpine's avatar
$44.1m follower assets
Win an annual StockOpine subscription for free
In case you missed this post (given the different time horizons of users across the platform), in the below post we announced the details of ‘Chapter 2’ for StockOpine’s Newsletter. The key change is the decision to turn our publication into a paid service.

Two Commonstock users have the opportunity to win a free annual subscription.

All you have to do is to a) like the original post, b) follow us on Commonstock and c) subscribe to the free tier of our newsletter. The lucky winners will be selected randomly and will be contacted through DM.

The Transcript's avatar
$2.5m follower assets
This week's thread with interesting charts & relevant earnings quotes we came across:

Big oil report record profits:
  • "Despite lower revenues, we delivered higher profits than 2012, our previous record year.." - $XOM CEO
  • "...our highest ever full-year results..."- $SHEL CFO

More here:
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Neil's avatar
$38m follower assets
Amazon Earnings
In this video, I will be talking about Amazon's fourth-quarter earnings report, and I will touch on a couple of important points mentioned during the earnings call. Long-term investors should focus on a couple of key numbers.


Neil's avatar
$38m follower assets
Google Earnings
In this video, I will go over Alphabet's fourth-quarter earnings report and explain why long-term investors should keep an eye on one specific business segment that performed better than expected.


Market overview update - S&P 500 Winners, Laggards and biggest Rebounders in 2023
  • S&P500 - Who leads in in 2023 & rebounded the most from the 52-week low?

View: Total Return % YTD & Above 52-week Low %

The same analysis for the Nasdaq 100:

Thoughts?

Mav
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Bull & Bear index since 2002
"Bulls make money, bears make money, pigs get slaughtered!"

👉 Bull & Bear index since 2002: that extreme bear in 2022 …
👉 while the recent rally into the normal range, but note that is far to be in the Extreme Bull territory
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A Conclusion to the Avatar 2 box office updates (until something interesting pops up)
It's been a while since I last talked about Avatar 2 here. Even as the film seen its hype drop significantly, the film continues to generate $1 million daily.

Looking at the chart from The Numbers, it looks like the film's momentum is dying out. The current box office total (domestic) for Avatar 2 is about $628 million. If it continues to generate $1 million in daily box office sales, it could reach the $700 million benchmark.

Avatar 2 is now the 4th highest grossing film globally. Its performance has proven the skeptics wrong by a wide margin and has become the highest grossing pandemic-era film ever. The film has given many people the best cinematic experience of their life and it has even became the highest grossing film ever in several nations and has become the highest grossing foreign film in many countries, like India.

As much as I thought the second film would outperform its predecessor, at least it made it in the Top 5. One thing I've observed with this film is that unlike the other pandemic-ea films, Avatar 2's success inspired more people to go to the theaters. The month of January had an unusually strong box office performance as it saw 5 films (all of them are different genres) all making over $10 million on MLK weekend (I'll have to find the memo I wrote on that). Spiderman: No Way Home didn't help bring more people to the theaters compared to what Avatar 2 did.

Going forward, consumers are going to demand that films boost their cinematic experience creation. Having great storytelling isn't enough to convince people to come to the theaters. The biggest pick and shovel play/beneficary of this trend is $IMAX, who provides the equipment to theaters and who gets a share of the IMAX ticket sales.
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Dividend Dollars Portfolio Update
This is just a snippet of the full update! Read here!

Dividends
This week I received three dividends. $0.91 from $SPY, $3.98 from $XYLG, and $27.79 from $T!

In my portfolio, all positions have dividend reinvestment enabled. I don’t hold onto the dividend, I don’t try to time the reinvestment, I just let my broker do it automatically.

Dividends received for 2023: $55.72
Portfolio’s Lifetime Dividends: $466.12

This week marks the end of our second January of dividend investing. Our dividend income this January was 26% greater than the income from January 2022! Great progress and looks like February is going beat that by a lot!

Trades
This was quite the volatile week with the FOMC meeting raising rates another 25 bps and the historically strong labor data. But it was volatile in the up direction, not the down, counter to my expectations!

The market rallied very strongly this week. I hate buying stocks when they’re up, so you’ll see that most of my activity this week was buying down into my worst performing stocks like $INTC and $AY. We sold a very conservative covered call on $T, reinvested dividends, and kicked off the weekly ETF buys on Friday.

Pretty standard week, with the exception of the new position we added on Thursday! All week I have been working on an analysis of the soft lines industry and finally posted that article last night. You can read that here. The thesis is that with normalizing inventory levels, falling shipping and material costs, and an improving macro backdrop, soft line retailers (specifically luxury good retailers) are in a great position to realize large margin recoveries and growing sales. For that reason, I started a position in Steven Madden $SHOO. However, the article does have a number of other picks for the industry as well, so please go read it and assess your options if you agree with the analysis!

Below is a breakdown of the trades I made this week:
• January 30th, 2023
o Intel ($INTC) – added 2 shares at $27.86
• January 31st, 2023
o Atlantica Sustainable Infrastructures ($AY) – added 1 share at $26.85
o S&P 500 ($SPY) – dividend reinvested
o S&P 500 Covered Call & Growth ETF ($XYLG) – dividend reinvested
• February 1st, 2023
o AT&T ($T) – sold covered call $21.5 2/10 for $2 premium
o AT&T ($T) – dividend reinvested
• February 2nd, 2023
o Air Product Chemicals ($APD) – added 0.1 shares at $293.40
o Steven Madden ($SHOO) – added 1 share at $37.83
• February 3rd, 2023
o SPDR S&P 500 ETF ($SPY) – added $10 at $413.79 per share (weekly buy)
o Global X S&P 500 Covered Call & Growth ETF ($XYLG) – added $10 at $26.69 per share (weekly buy)
o Schwab US Dividend Equity ETF ($SCHD) – added $10 at $77.38 per share (weekly buy)

Next week I will continue to add $10 into each ETF ($SPY, $XYLG, and $SCHD) and will continue to hold onto some cash if the market gets lower. I have started to slowly deploy that cash in case a bottom has already been hit, but only time will tell. I really want to deploy this cash position into $CMCSA, and $INTC to build 100 share positions in them for covered call activities. I will also be watching $T for opportunities to sell covered calls.
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$PFE Earnings - Was the Recent Sell-Off Warranted?
$PFE is one of my larger holdings and it has had a pretty significant sell-off sincemid-December.

I wanted to dig into their most recent earnings report and see if there were any red-flags that support the sell-off.

First, I will start by sharing the first line item from Pfizer's report, "Full-Year 2022 Revenues of $100.3 Billion, An All-Time High for Pfizer, Reflecting 30% Operational Growth". Good start!

First red flag comes in their second line item - more than half of their 13% revenue growth was driven by their COVID-19 drugs PAXLOVID (anti-viral) and Comirnaty (vaccine). Pfizer has been riding some significant tailwinds from the success of these two drugs, but we cannot (hopefully) rely on these two medications to continue to be growth drivers.

Leadership raised both Full-Year 2023 Revenue and EPS guidance from $67B to $71B and $3.25 to $3.45, respectively. With share price at earnings at $43.55, that is a forward P/E decrease of 13.4 to 12.6. That is a positive for value investors out there.

The report goes on to say that there is currently a large inventory of COVID-19 medications on hand, so sales of PAXLOVID and Comirnaty are expected to decline in 2023. This anticipated decline will force Pfizer management to depend on their other drugs to make up the decline and reach those increased revenue targets. Their answer came on Slide 7 of their presentation:

Pfizer appears to be banking on the successful launch of RSV vaccines in 2023 to be the primary driver for the next year. Additionally, a Revenue CAGR range of 6 - 10%. Below is Pfizer's 10 year Revenue CAGR, compliments of Koyfin. Prior to the pandemic, their highest CAGR was right around 8% in 2017.

The 6-10% range seems a little high given their best non-COVID year was 8%. I will be interested to see if this pans out.

In summary, I think the sell-off could have been in anticipation of the known headwinds from the projected reduction in sales from the COVID drugs. I'll set a reminder to check back in next year and see if they hit their 2023 guidance numbers.

What are your thoughts? Do you own or follow Pfizer?
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Every healthcare/pharmacy stock is getting the same treatment no matter what they report. CVS and another name I’m interested in mckesson all in the healthcare sector all down for the same reasons. Only thing I can think of. Is it warranted no. But that’s definitely something to continue to monitor to see what your companies have to say and if they can reiterate guidance even with slower Covid focus and sales. Still a big believer in my healthcare names going forward
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Edmund Simms's avatar
$30.7m follower assets
Debt cycle monitor
Private debts are a better economic crisis indicator than public debt. High and rapidly growing levels of private debt weigh on aggregate demand. Interest rate rises make debt maintenance more difficult and can kick off a deleveraging.

•••

Risk of private-debt crisis
  • High¹: France, Korea, Sweden, Switzerland, Thailand
  • Medium²: Australia, Belgium, Brazil, Canada, China, Ireland, Japan, Netherlands, Spain, United Kingdom, United States
  • Low³: Germany, India, Indonesia, Italy, Mexico, Poland, Russia, Saudi Arabia, Turkey

¹ High-risk: Country has a private debt ratio > 150%, five-year growth in private debt > 10 percentage points, and interest rates going up.
² Medium-risk: Two of the three criteria above.
³ Low-risk: One or less of the three criteria above.
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Edmund Simms's avatar
$30.7m follower assets
Global stocktake
Valuing regional and global stock markets to help us find the best ponds in which to fish for value.

•••

I used a five-year free cash flow to equity (FCFE) model and the fundamental growth rate, the growth in earnings predicted by the return on equity and retention ratios, to value stocks at $95.2trn globally. But given the $105trn price tag, global share markets, on average, still look slightly overvalued.

Valuations by region

African and Middle Eastern stocks look like the best value, while North American and Caribbean stocks are overvalued.

Valuations by sector

Energy, Financials, and Materials companies look the most undervalued. While Consumer Discretionary, Information Technology, and Health Care firms look the most overvalued.

Country and regional risks

The global equity risk premium, the extra return investors demand to buy global shares instead of bonds, dropped by 50bp to 6.4%.

Moody’s, a rating agency, downgraded Nigeria’s credit rating from B3 to Caa1, saying they expect the country’s fiscal position to continue deteriorating. They also downgraded Tunisia from Caa1 to Caa2 as they reckon the government will likely default. In contrast, they upgraded Uzbekistan from B1 to Ba3, saying the country’s reform program is going well and will continue.

Regional and sectoral data

Public companies have $44trn of common equity invested in them, and that equity earned a 13% after-tax return in the past year. Middle Eastern, African, and South American companies generated the most profit per dollar of shareholder funds. But Caribbean and Asian companies are still lousy.

Based on reinvestment, Middle Eastern, Eastern European, and African firms are likely to grow the fastest, while North American and Caribbean ones the slowest. North American firms are only reinvesting one in every four dollars of profit, while Caribbean companies earn a crummy 7% return on equity.

Based on growth rates suggested by the money companies have retained and what they earn on that capital, energy businesses are likely to expand the fastest. Their implied fundamental growth rate is 14%.

While this measure isn’t perfect—and given that inflation was pushed up by energy, material, and industrial prices—if these companies expand production, this will help reduce input prices for other companies and continue to pull inflation down. This disinflation has already started to feed into lower producer prices. The producer price index (PPI) dropped 0.5% in December.
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