LT's avatar
$19m follower assets
How Books Shaped My Investing Philosophy
My favorite finance book is One Up On Wall Street by Peter Lynch.
Peter Lynch books are an absolute delight to read because they are written in a light-hearted tone; it's as if you're having a casual conversation with him. Meanwhile, he was the top fund manager at Fidelity, achieving a 29% CAGR for the Magellan Fund for 14 years.

I love this book because it focuses on harnessing a developed perspective as you approach individual stock investing. Lynch breaks down how to classify individual companies as stalwarts, fast-growers, turnarounds, etc. Lynch truly believes retail investors can beat professional Wall Street analysts for a few different reasons. Retail investors have a unique edge versus large funds in the sense that we can invest in smaller companies before the big boys take a position. This is primarily due to:
  • Less liquidity: Because small companies trade fewer $ worth every day than larger companies, the exit liquidity is a risk most funds will avoid
  • Not being able to take a meaningful position early on: there are typically restrictions on max % of portfolio allocated to a position, and max % ownership of a company. A small position may not be impactful to portfolio returns for a big fund.
This is why I tend to focus on smaller companies, there is an inherent edge.
Peter Lynch also loves companies with ugly names, or something in your backyard. Somewhere Wall St analysts have yet to venture. I applied this perspective early in the pandemic when a microcap genetics testing company in my neighborhood, Fulgent Genetics ($FLGT), had gotten an EUA for Covid-testing. The Covid-testing revenues had not hit the income statement yet, and their most recent earnings call transcripts mentioned their facilities were running 24/7. The trade ended up working out very well, and at some point I had 100% allocated to it. My only regret is I didn't hold it any longer as it went on to 6X after my sale. Eh, better to leave a month early than a day late.
Another edge for retail investors that is mentioned in the book is that we can zoom out longer on our investment horizons. We don't need to justify any sluggish performance from specific companies to anyone. We can afford to hold through a bad quarter as we don't have any quarterly reports to satisfy clients with.
We also don't have % limits of allocation in our portfolio. While some practice diversification, I personally concentrate into my best ideas; I currently hold 4 names in my portfolio. It feels easier to hold through a downturn when I know a company inside-out versus keeping up with many companies. I also believe that if you hold too many companies, you may as well own the index. Again, just my personal investing philosophy, but everyone has their own style!

I understand why many investors feel safer in mega caps. The $GOOGL and $AMZN of the world are relevant in any industry they enter. They can easily swallow up any competition. It's a lot less stressful to own, but I tend to avoid these stocks for two reasons:
  • The Law of Large Numbers: it takes more to move earnings once you are a trillion $ company
  • Lack of Edge: What can you possibly know about Google that others do not? There's plenty of coverage by experts.
For these reasons, I believe the market gains from this point on will look closer to market-like returns (though great companies can likely outpace market even at lofty sizes).

The Most Important Thing by Howard Marks is my runner-up. This book taught me a lot about risk vs return. Marks mentions how reward is usually best when we feel things are riskiest, e.g. stocks are at lower prices. Said another way, we cannot assess risk of an asset without considering the price. Perhaps all the bad news is priced in, and thus the stock price is depressed to reflect the grim situation. If we as investors do not believe the situation is as grim as the price declares, this is our opportunity to buy companies at great prices for higher forward returns.
There are also the opposite situations: where companies are priced to perfection. We have seen many examples where stocks reflect a very optimistic outlook for the company, and any softened operations can send the stock crashing. I believe many larger caps exhibit this feature, simply due to "took big to fail" sentiment. After the recent drawdowns, mega caps look better here for future returns, but prior to the drawdown, everyone bid up the stocks to all time highs. This is when the stock likely has the highest risk.
This perspective is not true for traders who will argue the opposite. They follow only stocks with high relative strength making new 52 week highs. Trading is quite a different game than picking long term investments. Traders care for high volume, strength, and to get in and out - essentially the opposite of long-term investors. As a long-term investor, you have the ability to set and forget. Let the business execute and come back to check on the seeds you sowed years later.

These two books make up the basics of all my fundamental investing perspective. I highly recommend both of these books to any level investor, but especially when you are first starting out. Even an experienced investor can find nuggets of wisdom when revisiting any of the chapters. These books build a good foundation from which you can then bridge the gap into more advanced material. It's one of those 80/20 moments, where 80% can be learned from 20% of material, and the other 20% of knowledge takes 80% of the remaining material.

I hope you found this insightful. Thanks for reading.

What about you? Who is your favorite finance author and what is your favorite finance book? My book shelf could always use more fantastic literature.

Amazon links for both books:
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I liked both of those. My personal favorite investing books are the Outsiders by William Thorndike and 100 Baggers by Christopher Mayer
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Samuel Meciar's avatar
$24m follower assets
$GOOGL I've been using YT Premium & YT Music for almost 5 months now. Loving it! I'm not going back to $SPOT.

This sub has basically replaced my Netflix & Spotify subscriptions, and I don't miss anything.
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Samuel Meciar's avatar
$24m follower assets
Remember when $META overpaid for Instagram and WhatsApp?

Remember when $GOOGL overpaid for Android and YouTube?

Remember when $MSFT overpaid for LinkedIn?

Well, $ADBE now overpaid for Figma :/ :/ :/

It's the same all over again. Bad acquisitions all over the place :( :(
On one hand so many were saying what an excellent management team Adobe has, right before poo-pooing their decision to pay so much for this acquisition. I’ll continue trusting management. They obviously know more than I do about the fit, competition, and goals 5-10 years down the road. Added with glee like I usually do.
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StockOpine's avatar
$41.3m follower assets
YouTube plan to share ad dollars with creators
YouTube announced plans to share advertising sales (45%) with creators of Shorts who meet certain requirements (more than 10M views and 1000 subscribers). TikTok does similar payments to popular stars but for a fixed fund.
How does this affect TikTok and Reels? Is short form video a winner take all market?

I find myself watching way too many food shorts, it’s just so easy to go down a rabbit hole when you have a creator that you enjoy watching
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Conor Mac's avatar
$337.4m follower assets
Where do Americans get their news?
Pew Research just released their latest Factsheet for US social media usage for news-related purposes. The data shows that of the 70% of respondents who claim to get news from social media, the likes of Twitter $TWTR, Facebook $META, Reddit and YouTube $GOOGL have fallen slightly. Twitter & Facebook still remain clear leaders.

Interestingly, it is TikTok that shows the most growth in adoption, with 33% of regular social media users getting their news from the site, up from 22% in 2020.

Here is a more granular view across a range of demographics.
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September Idea Competition - Alphabet ($GOOG, $GOOGL)
Introduction
"So, how may investors navigate the impending rising rate environment? Historically, highly profitable, well-capitalized firms perform best when financial conditions tighten."

Taken from Institutional Investor (March 2022), this statement outlines an empirically proven strategy for successfully navigating the uncertainty of rising rates and inflation.

Google fits the description perfectly yet suffers from investor uncertainty and trades around a 52-week low. This (temporary) dislocation creates an opportunity for investors to buy a great business at a discounted valuation.

Thesis
  • Google has demonstrated exceptional resilience through various economic environments, enabled by durable moats in its core businesses.
  • Recent financial performance indicates continued strength; negative analyst revisions
create a catalyst for outperformance in the next year.
  • A drawdown of magnitude and duration not seen in the last decade leaves Google trading at a discount to peers and nearly one standard deviation above its average FCF
yield dating back to 2004. This creates a great buying opportunity.

Resilience and Moat
In twenty years, Google has reported just one quarter of revenue declining Y/Y. This type of resilience is enabled through a durable moat. Google Search has maintained monopolistic market share over the last decade, and there remains a lack of convincing catalysts for this to change.
**

**
Among the threats frequently mentioned are:
  • Apple’s development of a search engine: While a possibility (though unlikely), it could actually be accretive to Google in the short-term. If Apple were to introduce its own default search, Google would recover the ~$15-20 billion it pays to Apple each year as free cash flow, which could drive a multiple re-rating.
  • Regulatory action: Google has long been subject to regulatory probes, and several proposed acts pose a threat. However, in light of the long history of threats in this area and the slow pace of legislation, I believe nothing will materialize in the next year.

For YouTube, the advantage of an 800 million video archive of user generated content creates a tough hurdle for competitors to overcome. The traditional format also caters
to a different use case versus TikTok with longer form videos. Meanwhile, YouTube Shorts is proving to be a capable competitor with over 1.5 billion monthly users less than two years after its launch.

Google Cloud, though dwarfed by AWS and Azure, has demonstrated an ability to gain market share. The cloud transition remains in early stages, with spending expected to double by 2026. While a longer-term tailwind, Google Cloud’s performance continues to be strong and outpaced rivals in Q2.
**

**
Google’s core businesses hold sustainable competitive advantages, which should serve the company in an uncertain environment. Google Search and YouTube remain proven, high ROI advertising channels while Google Cloud benefits from structural tailwinds within cloud.

Revisions as a Catalyst
In the shorter term, a company’s performance against consensus estimates drives the stock price. Recently, analysts have revised EPS estimates for Google significantly downward:
  • Q3 2022 revised from 1.49 to 1.27 (-15%)
  • Q4 2022 revised from 1.67 to 1.41 (-16%)
  • Q1 2023 revised from 1.50 to 1.33 (-11%)
  • Q2 2023 revised from 1.61 to 1.39 (-14%)

Google's stock has dropped 30% compared to negative revisions of ~15% (multiple compression). Continued earnings outperformance coupled with a potential multiple re-rating (likely if it beats estimates) create catalysts for outperformance in the next year. Despite the economic environment, I believe Google has a great opportunity to beat estimates, particularly in light of the company’s strong Q2 performance, a period when many advertisers exhibited weakness.

Risks
On a one year horizon, the primary risks seem to be:
  • Earnings weakness: While there is a possibility of growing weakness in advertising, I’m confident Google will, once again, prove resilient. History doesn’t repeat, but it certainly rhymes.
  • Passive fund flows: Heavy weights in the NASDAQ and S&P 500 expose Google to passive equity outflows amid prevailing uncertainty. Predicting fund flows, however, is a difficult game to play; investing in resilient, highly profitable businesses at depressed valuations is my preferred game.

Valuation
Google is undergoing its largest drawdown in the last decade.

So, how much is the market asking for a piece of the business? Compared to peers and historical multiples, it seems reasonable. Reversion to the mean can be a powerful force in markets.

Conclusion
At its core, investing is simple: buy great businesses when Mr. Market offers a bargain. Google trades at a meaningful discount to peers and its historical average FCF yield, yet it remains one of the best businesses in the world.
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Excellently condensed! I must say i thought 750 would be tough but people are getting so creative with it and they are a pleasure to read :)
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Apple's Achilles Heel
The majority of Apple's suppliers are in mainland China or Taiwan. 90% of Apple's products are made in China through contractors. The chips that Apple designs and the chips that Apple outsources from other fabless companies are all made in Taiwan via TSMC.

With a high possibility of war between China and Taiwan sometime soon, the ramifications of that war are much bigger for $AAPL than for $NFLX $META $GOOGL $AMZN, and $MSFT.

Sure, Apple has tried to diversify its manufacturing network to countries like Vietnam, India, the Philippines, Thailand, etc. but those developments are small and will need time to develop and scale. These manufacturing facilities in these countries can't just replace the capacity that Apple has in China because they're too small.

If China were to invade Taiwan, over 90% of the advanced chip production will go offline. The wave of sanctions that China will face as punishment for its invasion of Taiwan will most likely lockout corporations from accessing their factories in China and prevent companies from receiving parts that they source from China.

This looming geopolitical crisis will make will turn Apple's immense reliance on China from a good thing (because it cost less to build an iPhone in China than in America) to a bad thing because of the sanctions that could be imposed on China if China were to invade Taiwan. Apple will have to build most of its manufacturing network from scratch as a result of this.

For all the Apple investors out there, pay attention to the brewing tensions between China and Taiwan. Based on how things are going, there's a high chance that a war could start soon.
Long HashiCorp $HCP if you're bullish on the multi-cloud trend
HashiCorp is a software company that helps companies use different cloud computing platforms (like AWS and Azure all at once).

Why would a firm want to be on multiple cloud computing platforms?

It's because it reduces the operational risks that come with encountering sever outages from a platform and it helps firms negotiate more on cloud computing pricing.

Rather than having an AWS outage cripple your operations, having a multi-cloud operation will allow a firm to keep operating by relying more on their other cloud service provider in the event that one of your cloud service providers has an outage.

$SNOW is a notable multi-cloud company where users can access their company's data across Azure, AWS, and GCP all at once.

As the multi-cloud gains more adoption, it's possible that the smaller cloud computing players like $ORCL and $IBM could see themselves gaining a bigger piece of the cloud computing spending pie. Meanwhile, $AMZN $MSFT, and $GOOGL will see their pricing power decline as they'll have to face more competition as they start losing power and influence over their clients.

In sum, check out Hashicorp!
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