Josh Kohn-Lindquist's Posts

$23.1m follower assets

Strive to Be Happy

I recently read this poem by Max Ehrmann, courtesy of James Clear's newsletter.

I was reminded of David Gardner's (Motley Fool co-founder) penchant for investing in stocks that spark joy and how he often says to "build a portfolio that reflects your best vision for the future."

"You are a child of the universe,

no less than the trees and the stars;

you have a right to be here.

And whether or not it is clear to you,

no doubt the universe is unfolding as it should.

With all its sham, drudgery, and broken dreams,

it is still a beautiful world.

Be cheerful.

Strive to be happy."

I know this is a bit random, but those last two lines were an excellent way for me to remember to focus on the bigger game at hand: do the stocks I buy help make the world a better place?

Outperformance is fun, but what am I really investing in these stocks for?

When it's the year 2100, and I'm gone, and my daughter is in her 80s, will she be proud of what I invested in for both of us along the way?

I know this probably applies to more consumer-facing companies than industrials or energy, but it is still interesting for me to think about.

Curious to know how important it is to you all to invest in stocks that can generate happiness, spark joy, and/or improve the world.

Thanks as always for reading. 🙏

Josh Kohn-Lindquist

@joryko March 17

$23.1m follower assets

My Worst Trade

Many moons ago, I worked at Two Rivers Golf Club in South Dakota. At the time, it was owned by MidAmerican Energy, which itself was owned by Uncle Warren and $BRK.A.

I'll never forget that my checks came from 666 Grand Ave., Des Moines, IA.

Due to some creative accounting issues within the payroll department, I received a couple thousand dollars in a 401k from a class action lawsuit that showed we should've had a 401k all along.

Armed with this cash, I picked up about $1,000 worth of $EBAY, around $20 a share, after listening to a Motley Fool Money podcast highlighting how their upcoming spinoff of $PYPL would unlock value.

However, I switched jobs and had to sell and rebuy my investments in a new IRA, since they wouldn't let me transfer shares.

No big deal, sell and rebuy eBay, right?

Well, I didn't. I was convinced I'd found better options.

Now eBay is up somewhere around 100% in the time since 2015 -- which isn't too bad to stomach.

But, the PayPal shares I would've received have also doubled since (not to mention they were up as much as 700% just two years ago).

So while maybe this isn't the most significant swing and miss in the percentage of returns lit on fire, it stands out to me as one of my worst trades because I sold (and didn't rebuy) for reasons that had nothing to do with either company's investment thesis -- just merely that I was convinced I could do better, elsewhere.

This single event always comes to mind when considering selling a company I own and plays a significant role in explaining why I tend to hold forever, even with a temporarily broken thesis.

It all ties back to my FOMO on future returns from stocks that I sell too soon -- which always seems to be most investors' single greatest trading regret.

I'd be curious to find out if you all think of this as an overreaction to one event or if I might've taken the correct lesson from a poor trading decision.

Thanks as always for reading. 🙏

Todor Kostov

@joryko Thanks for the post, Josh. There will be always future opportunities to invest so no point pondering too much on past misses.

+ 24 comments

Josh Kohn-Lindquist

@joryko February 27

$23.1m follower assets

$UNP Up 10% After Announcing New CEO Search

While I'm not a devout efficient markets supporter, Union Pacific's 10% increase today after its former CEO Lance Fritz announced he was stepping down feels quite telling.

Spurred by a presentation sent to the board from activist investor Soroban Capital Partners yesterday, it is clear the market is optimistic about a fresh vision as this big of a move is wild for a $100B+ industrial.

Here is the link to Soroban's presentation:

https://static1.squarespace.com/static/60ad6c502b44e43fe7a303b9/t/63fbb43a83c4855b6df06392/1677440059367/Soroban+-+Presentation+to+Union+Pacific%27s+Board+of+Directors.pdf

I'm not generally excited by the world of activist investing.

However, I will pay close attention to this over the next few months since UNP was a new position I was beginning to build for my daughter, and many of the points made were convincing.

Much of this presentation seems to boil down to UNP's management effectively mismanaging a tremendously wide moat that the company operates behind.

In simpler terms, its long-term opportunity remains perfectly intact, but its short-term issues must be fixed immediately.

Perhaps the most jarring portion of the presentation was the company's Glassdoor ratings (say what you will of these). Of the stocks in the S&P 500, UNP came in dead last in each of the following employee ratings:

Overall Rating
Recommend to a Friend
CEO Approval Rating

Generally speaking, I think these ratings can be overhyped, but in UNP's case, it is pretty clear something needs to be rejuvenated.

Historically, Union Pacific has kept its ROIC well into the double digits -- currently sitting around 15%.

Furthermore, its 2.7% dividend has been increased for 16 consecutive years and only uses about 45% of its earnings.

Even after its jump, UNP trades at 19x earnings or 23x FCF, whichever you prefer, and still looks pretty attractive -- especially if its short-term performance can be improved with a new leader.

Curious to know what you all think of activist investing in general and what you think in Union Pacific's case here.

Will Union Pacific beat the market over the next decade?

41%Yes

33%No

25%Roughly equal

12 VotesPoll ended on: 3/2/2023

Josh Kohn-Lindquist

@joryko February 13

$23.1m follower assets

Ho-Hum Earnings Reports, but Two Great Investments: Better Than Vice Versa

I took a stab at writing about one of my core holdings, $PINS, and one of my daughter's, $IDXX.

Recently reporting earnings, I wanted to try to highlight why I still like (and am buying) each of these companies for the long term despite their Q4 earnings reports being less than awe-inspiring.

https://www.fool.com/investing/2023/02/10/2-top-stocks-im-buying-in-february/

Here's one key takeaway for each stock that reinforces my investment thesis in them:

Pinterest - Shoppable ads grew by 50% YoY, while Gen Z's engagement with videos on the platform grew stronger -- with the young segment accounting for 50% of the platform's pinned videos. Yes, sales only rose 4% and GAAP earnings nearly turned negative. But compared to its advertising peers, Pinterest is doing just fine, considering how brutal the ad industry has been lately.

Idexx Labs - While it "only" grew sales and EPS by 7% and 14% in Q4, management is guiding for 19-26% EPS growth in 2023. Roughly 90% of the company's core segment's sales are recurring in nature (thanks to its razor-and-blade model) and Idexx has a 97% retention rate across each of its modalities. Despite a down year for vet visits (which as weird as it is to say faced tough comps from pandemic-aided adoptions), the human-pet bond will only grow stronger over time -- making the company's products all the more important.

Would love to know your biggest fears about either company if they are a stock you keep tabs on or own.

Thanks as always for reading. 🙏

Which would you rather own for a decade?

50%Pinterest

30%Idexx Labs

20%Both

0%No dividends?

10 VotesPoll ended on: 2/16/2023

Josh Kohn-Lindquist

@joryko February 2

$23.1m follower assets

SoFi: GAAP Profitability Incoming

$SOFI reported earnings on Monday, and I wanted to go back and highlight the company's rapidly improving GAAP net income margins over the last five quarters.

Generally speaking, a stock with a -9% net income (loss?) margin doesn't catch my attention. But in SoFi's case, it may be worth a look from most of us. Consider its last five quarters of GAAP profit margin improvements:

Cue the NFL broadcaster joke that if they keep this rate up, they'll have net income margins of 100% in a few years.

Regardless, glancing at the chart above, it may be no surprise that Founder and CEO Anthony Noto expects true GAAP profitability by Q4 2023 -- a remarkable feat for a stock that just grew net revenue by 60% YoY for FY 2022.

Here's a quick SWOT analysis for SoFi's Q4 2022 earnings and what makes it an attractive stock to consider:

Strength - We already highlighted this with the GAAP net income margin improving and profitability on its way in Q4, hopefully. However, SoFi's bank charter designation is also worth noting, as it has grown deposits in its financial services segment from less than $1B at the end of 2021 to $7.3B as of Q4 2022. These deposits provide immense capital to continue funding its lending segment.

Weakness - In its lending segment, student loans and home loans are more or less AWOL due to the macroeconomic environment they face. Weirdly, this makes SoFi's results -- both revenue growth and better margins -- all the more impressive, considering it is doing it with one hand tied behind its back.

Opportunity - Already with Galileo, and now acquiring Technisys, SoFi's technology platform is positioned to become rather important to the digital banking industry. As Noto puts it, they intend to become the AWS of digital finance, which is an interesting but apt comparison, in my opinion. What was noteworthy from the earnings call was that of Galileo's 11 new clients from Q4, nine already had an existing base of customers -- demonstrating that it is drawing the attention of larger, more mature banking partners and not just young neobanks.

Threat - The existential threat for SoFi will probably always be its lending unit -- particularly its line of personal loans. This market admittedly could go sour quickly, but it is worth noting that the weighted-average FICO score for its personal loan customers was a robust 747. So it would take a pretty strong shock to the consumer finance environment to harm SoFi irreparably.

Altogether SoFi's member count grew by 51% in Q4, added 24% more lending products YoY (even with student and home loans struggling), and increased its financial service products usage by 60%.

At just 4.1 times sales, SoFi's 58% net revenue growth in Q4 and potential incoming GAAP profits in 2023 make it well worth a spot in my portfolio.

What do you all think of SoFi? Anything you are worried about, or like?

Which has better odds by the end of 2025?

28%SoFi still trading below $10

71%SoFi being up 100% or more

21 VotesPoll ended on: 2/5/2023

SLT Research

Nice post Josh. Really like the SWOT analysis. Will be interesting to see if the company turns profitable by the end of the year.

Do we know the share of the revenue derived from lending?

+ 22 comments

Josh Kohn-Lindquist

@joryko January 30

$23.1m follower assets

4 Fast-Growing Dividends

While I love high-yield dividends (that are sustainable) as much as anyone, quickly growing dividends are more exciting to me over the long haul (also if sustainable).

I recently discussed four of my favorites in $ASML, $ODFL, $TSCO, and $ZTS.

https://www.fool.com/investing/2023/01/28/4-stocks-with-high-dividend-growth-to-buy-in-2023/

These stocks have grown their dividends between 178% and 481% over the last five years.

Here’s my favorite thing about each stock:

ASML - Monopoly in the extreme ultraviolet lithography market and an ~80% share in the more mature deep ultraviolet market. The semiconductor industry would temporarily (indefinitely?) die without ASML, so I’ll happily pay a premium to own it and receive a growing dividend.

Old Dominion - Best-in-class profit margin of 22% and ROIC of 29% in the less-than-truckload industry. Wide moat around the complexity of its logistical operations and startup costs.

Tractor Supply - 27 million members in its rewards program and generates half of its revenue from pet and livestock sales which tend to be recurring and sticky. Dominating its rural/small town lifestyle niche.

Zoetis - Portfolio of over 300 pet and livestock vaccines and medicines makes the company a massive force in the $45B animal health industry. Human-pet bonds only continue to grow stronger with time and this is a recession-proof industry.

Would love to know - - what is your favorite quickly growing dividend out there?

Which performs the best through 2033?

69%ASML

13%Old Dominion Freight

13%Tractor Supply

4%Zoetis

23 VotesPoll ended on: 2/2/2023

Dissecting the Markets

At the end of the day, we really need to build more fabs outside of Taiwan. Also, we will also continue to invest in newer and better lithography machines. That's why i voted for ASML.

The rest, I don't know much about their growth potential.

+ 4 comments

Josh Kohn-Lindquist

@joryko January 24

$23.1m follower assets

3 Bargain Picks for 2023

I rambled a bit about $GOOGL, $THO, and $NVR and why I like them right now, each with Free Cash Flow (FCF) Yields above their 10-year averages.

https://www.fool.com/investing/2023/01/23/bargain-shopping-2023-3-wildly-undervalued-stocks/

A brief takeaway from the article for each:

Alphabet - With the hype around TikTok and Chat GPT near all-time highs, the company may be trading at a slight discount. By no means deep value, but interesting here as I want Alphabet to be my horse in the AI race. Similarly, YouTube is my pick in the streaming wars, and Shorts (primarily thanks to starting to pay their creators) make the most sense to me for short videos (over TikTok). Time will tell, but I'll gladly keep adding around a 5% FCF Yield. Not to mention the cloud. And search. And the moonshots.

Thor - Its valuation is artificially inflated due to the cyclical nature of its industry (and it has crushed lately) -- but assuming the worst, it still looks cheap. Even if FCF is cut in half in 2023, it still will trade above its 10-year average FCF Yield. Using management's downside scenario for the next year, it would still trade at seven times Operating Cash Flow. Moreover, Thor's positioning is unbelievably robust, owning 50% of the market in North American motorized RVs and a 40% share of the NA towable RV market. Posting a positive net income every year since 1980, maybe this isn't such a cyclical pick.

NVR - The homebuilder's Return on Invested Capital (ROIC) of 27% is best in class among its peers, generating ample cash to fund share buybacks. Shares outstanding are down 36% in just the last decade. The stock is up 49,000% since its IPO in 1992, and I love its adherence to a capital-light model.

What stocks do you think are compelling bargains? Or what is your favorite in this group?

Thanks as always for reading. 🙏

What's your favorite discount?

90%Alphabet

5%Thor

5%NVR

20 VotesPoll ended on: 1/27/2023

Conor Mac

For me, its GOOG all day, whats yours?

+ 8 comments

Josh Kohn-Lindquist

@joryko January 19

$23.1m follower assets

Revisiting Commonstock's July "Buy the Dip" Competition 6 Months Later

Six months ago, I built a portfolio to keep track of everyone's July Idea Competition picks and thought now is as good of a time as any to give a shoutout to the top picks so far.

With no further ado:

3-way tie for 5th - up roughly 25% since July 20th, 2022:

@pessen - $NVCR https://commonstock.com/post/c4f53d8e-ad2f-403a-a585-999c7c384aa4

@stockopine & @valuabl - $BKNG https://commonstock.com/post/9d6cfa7b-3ffd-4501-bad4-d5675edde156 & https://commonstock.com/post/a53340c4-d91e-47fe-8b3b-3022a144fb9f

@mexicaninvestor - $CTS https://commonstock.com/post/767112ee-0fcd-4513-91ca-7bcfbc6aa7d7

4th place - up 31%:

@rpinvestments & @invesquotes - $ASML https://commonstock.com/post/0636dee0-be7c-4f15-b968-15a5eb44689f & https://commonstock.com/post/9a551729-ec40-4d19-a1d1-fba0afe5dcda

3rd place - up 47%:

@girolino - $MELI https://commonstock.com/post/1038350f-02a2-4c33-b65d-825fd29eda1b

2nd place - up 65%:

@stonkmetal - $RICK https://commonstock.com/post/8d3661b2-5d0a-42ea-b29f-e7857dce1042

1st place - up 120%:

@asvid - $CROX https://commonstock.com/post/f6189226-1c89-490d-ab58-7b225be7a12e

Congrats to everyone on the leaderboard, and thank you to everybody for their pitches and excellent insights! 🙏

Overall, the portfolio is up 4.4% since 7/20/22, beating the S&P 500 Index's Total Return of 1.7% over the same time.

I apologize if I missed anyone or did something odd (I am pretty confident I may have done just that).

Great job, everybody -- looking forward to seeing how things sit here in another six months.

Edmund Simms

Love it!

+ 24 comments

Josh Kohn-Lindquist

@joryko January 16

$23.1m follower assets

Spinoff Dumpster Diving: $MBC MasterBrand Edition

While money can be made sifting through unloved spinoffs, there is usually cause for concern.

However -- and though it is unloved -- MasterBrand is a rare market leader that has spun off from Fortune Brands Home & Security (now $FBIN Fortune Brands Innovations).

And I think it looks interesting. (?)

But first, what makes MasterBrand unloved, specifically?

Spinoff Things

Foremost, it is spinning off from Fortune Brands, which was a dividend payer. Since MBC doesn't plan to pay a dividend immediately, holding it is useless for most income-focused investors.

Second, FBIN and MBC were removed from the S&P 500 Index as their market capitalizations were too small post-spinoff. Without the "forced buying" for S&P 500 ETFs and mutual funds, the two stocks (very much so with MBC) are left to go without massive institutional buying like before.

Finally, MBC will carry $950M in debt while only having a market cap of around $1B, which is always a great way to scare away investors. However, with the figures presented below, I am comfortable facing this debt load.

Quantitative Excitement

Digging through MasterBrand's prospectus, I was pleasantly surprised to see that its GAAP net income (NI) and operating cash flow (OCF) were the following for the last three years:

Last 12 months - $175M NI and $180M OCF
2021 - $183M NI and $148M OCF
2020 - $146M NI and $205M OCF
2019 - $101M NI and $149M OCF

Averaging these out a bit, Master Brand trades at about 6-7 times GAAP earnings and OCF.

Qualitative Support

This valuation is meaningless if MBC's operations are ugly, but it is a steady-Eddie type in a leadership position in the sexy world of cabinet manufacturing.

$3.2B in sales gives them a 24% share of the market
Their next-biggest peers are 16% and 15% of the market, with the remaining 45% coming from over 11,000 competitors
Two-thirds of MBC's sales come from remove and replace remodeling, while the rest comes from new construction, insulating it a bit from the housing market.
Now separate, MBC will digitize its processes, run leaner operations, boost margins, and eventually focus on M&A activity, accumulating some of its 1,000's of tiny competitors.
Incremental organic CAGR of 4-5% over the long haul

Ultimately, MasterBrand isn't the wildest spinoff we will ever find, but that is also its appeal.

Do any other spinoff-friendly humans out there find this one interesting?

Or anything you think I missed or need to worry about?

Which stock in a spinoff situation do you prefer?

57%The parent company

14%The spinoff

14%Whichever one the CEO goes to

14%Whichever faces forced selling

7 VotesPoll ended on: 1/19/2023

Joey Hirendernath

This is an interesting one but I guess the best course of action for DD is to understand the reasons why the spin-off happened in the first place.

I guess speaking generally spin-offs tend to outperform for a few reasons. Management teams at the spin-offs have greater incentive to produce, have greater freedom to start new ventures, rationalize operations, and trim overhead. Meanwhile, management teams at parent companies can focus more on core businesses. Shares in spin-offs and parents both appear to be worth holding. However, if one has to be sold, study findings suggest that, because of its smaller margin of out-performance, on average, the parent should get the ax.

+ 1 comment

Josh Kohn-Lindquist

@joryko January 10

$23.1m follower assets

3 Dow Stocks That Could Soar

While declaring that $HD and $V (who have posted total returns of around 500% over the last decade) are poised to soar in 2023 is far from bold, sometimes it's best not to overthink things.

Meanwhile, saying I like $MMM feels uncomfortably bold. Facing an unbelievable amount of litigation -- considering it was initially famous for Post-it notes -- the company is being priced for no growth.

https://www.fool.com/investing/2023/01/07/these-3-dow-stocks-are-set-to-soar-in-2023-and-bey/

Ultimately, I think all three are interesting at today's prices -- here's a short thesis for each:

Home Depot - X-factor stock with dividend payments up and to the right (534% growth in the L10Y) and shares outstanding down and to the right (31% lower L10Y), with a high and rising ROIC (16% to 42% L10Y). Near 50-50 split between Pro and DIY segments provide stability regardless of the housing environment. Not the worst place to look at 19x earnings.
3M - Setting aside litigation surrounding 3M's use of "forever chemicals" and its subsidiary, Aearo's legal issues -- the company has averaged $5B in FCF the last few years. While we wait for these issues to be resolved, 3M will pay a near 5% dividend (which remains easily covered by FCF) and continue to lower its share count (down 20% L10Y). However, at just 13 times operating cash flow, it is trading near its most attractive valuation of the last decade.
Visa - Not much to say here. X-factor stock like HD with dividends up 445% L10Y and share count down 19% over the same time. With a ROIC of 26%, a small but quickly growing 0.7% dividend, and a network effect to end all network effects, Visa makes for a tremendous steady-Eddie pick at 25x FCF.

Are there any stocks you love or hate from this group?

Or do you have a better Dow pick set to soar?

Which stock posts the best total return through 2030?

40%Home Depot

3%3M

55%Visa

27 VotesPoll ended on: 1/13/2023

Christian

Absolutely love Visa from this group @ifb_podcast

+ 11 comments

@joryko

Josh Kohn-Lindquist

$23.1M follower assets

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