Dave Ahern's avatar

$3.5M follower assets

Breaking down the stock market for beginners by using everyday language. Co-host the IFB podcast with Andrew Sather. LIke everyone, trying to get a little smarter everyday.
Dave Ahern's avatar
$3.5m follower assets
Speaking of pricing power, ULTA just announced the ability to increase prices. I love it. Most companies I own have this ability and one I’m eyeing: Deere might be the best at it
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Dave Ahern's avatar
$3.5m follower assets
Creating a one-sentence summary for a company
Here's a hard exercise, write a one sentence summary of a company. Here's my try with $V.

Visa is a trusted global network in digital payments, making its money by acting as a middleman between financial institutions and merchants as a payments technology company.

What have you got??
Definitely more challenging than it seems. I think your try captures it accurately and the sentence structure isn’t verbose.
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Dave Ahern's avatar
$3.5m follower assets
Too many of my companies are changing CEO’s lol. I gotta study all new people. First Starbucks, now Visa, what’s next?? But honestly everything I’m reading seems like a great hire and well deserved. To some degree it’s kinda hard to not be able to lead Visa, I think the business basically runs itself lol but you always need a strong leader at the helm of whatever company
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5-Tool Companies
Companies like $BAM, $CNSWF, and $TMO are great examples of 5-tool companies. What are 5-tool companies?

What are the five tools:

🏰 Moat
⚖️ Long-runway or scale
🏢 Great management
🪙 Fantastic Capital allocators
💰 Strong balance sheet

A 5-tool biz is not always the best, but tend to produce superior returns.

What are some of your favorite 5-tool companies?
Screening for Stocks Like Buffett/Munger
This Four Filters Formula first appeared in the 1977 Letter to Shareholders. We can use these filters to find investments in the Buffett/Munger style.
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$AMZN, $MSFT, and $GOOG continue to dominate cloud infrastructure.
AWS with 34% market share, more than twice Azure and Google Cloud, with the top 3 accounting for 66%+ of the market.

All part of me trying to learn the cyber security space, learning the cloud. Investing is hard and trying to expand one's circle of competence can be head banging sometimes, but I will keep banging away.
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Looking for Brokerage Suggestions
Hi All, I am looking for brokerage suggestions from those of you investing outside of the US?? Our show gets a fair amount of questions regarding what brokers they should use and my home bias comes home to roost to much, so I am was hoping anyone outside of the US could share with me what they think are the best options where they live and invest, whether it is your home country or outside of your home?

Then I can share that info with our audience, thank you for any suggestions 🙏🏻
For the UK - Freetrade for beginner to intermediate, and Saxo Bank for those looking for wider coverage of markets and asset classes.
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$V Bear/Bull Cases
$V continues to execute and the company grew 22% YoY. Visa is "only" down 9.78% YTD compared to the market's 22%ish.

But something I like to do is look at the bear and bull case for companies, or to use a Mungerism, invert, always invert.

Below are some bull bear cases for $V.

Bull cases for Visa:

  1. One of the longest-lasting 2-sided network effects in the world is Visa. To enter the market, new payment networks would have to persuade both consumers and merchants to use their platform, making it very difficult to challenge Visa's dominant position.
  2. Visa doesn't make loans, thus it doesn't assume any credit risk. Assessment Fees, which Visa collects from credit and debit card transactions, are a source of revenue. The enterprise is a global tax on cashless transactions.
  3. It is no secret that the global shift to digital payments is disrupting the use of cash. In addition to the portion of digital spending that is done online, credit card networks are seeing an increase in usage. The long-term decline in the use of cash is very advantageous to Visa. As the shift toward cashless transactions continues globally, there is still a long runway.
  4. In exchange for extraordinarily large margins, Visa supplies the technology to allow transactions through their network. The average free cash flow margin for Visa is 45%. These unit economics are beyond the reach of the majority of businesses.

Bear Cases for Visa:

  1. Of all companies in the world, $V has one of the strongest brands and moats. However, the concept of decentralized finance (or "DeFi"), which has gained popularity in part due to the emergence of crypto, poses one of the biggest hazards to the Visa. DeFi transactions would take place via a decentralized system, effectively eliminating companies like Visa from the picture. Decentralized protocols may also be used by developing nations with high cash usage to expand their payment infrastructure in place of Visa or MasterCard.
  2. The consumer and business spending markets can be volatile for Visa. Economic downturns, business closures, a decline in cross-border travel, and any other occurrences that can hurt a region's overall spending propensity will impede Visa's expansion.
  3. Even though Visa does not profit from interchange fees, it still establishes them in accordance with regional authorities. Visa has been pressured to decrease interchange rates by a number of countries and business associations. Lower interchange rates might make local issuers less inclined to advertise goods bearing the Visa brand, which would be detrimental to Visa's business.
  4. A competitive risk from fintechs, governments, and other techc ould impact $V's pricing or competitive strategy. Smaller players are free to develop payment solutions that banks can adopt and introduce to the public thanks to protective regulation like the PSD2 in Europe. These rules may divert payment transactions from the Visa network or create a highly competitive environment where Visa may be able to compete in a way that supports its expansion and financial success.
  5. $V s a significant participant in a duopoly. The business confronts antitrust risks that could prevent wise strategic partnerships or acquisitions that regions or governments view as predatory. They might also obstruct internal measures that would increase their market share.

That's a wrap, thanks for reading today's short post on the bull and bear case for Visa. I hope this helps give you an idea of how to approach investing in different businesses.
Great job as always Dave. Loved the bull cases and definitely can acknowledge the bear ones. Besides the first bear case-don’t have to worry about that at all
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Amazon finally doing the right thing. Still probably hate the company but at least they doing the right thing finally because they spend cash like it’s going out of style. I don’t think I can ever forgive Amazon when they tried to come at CVS, probably me being emotional and irrational but I’m okay with that. Google don’t make me mad as much 😂
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