Stocks

Interesting, and often contrarian, Snippets on individual companies and the stock market.

Stocks

Real Options and Valuation

  • A fascinating read about the use of real options in valuation analysis by Mauboussin and Callahan.
  • They argue it applies to a subset of companies – namely those with adept management, strong competitive position and high asset volatility.
  • They also show why 2020 had characteristics (like decoupling of volatility and equity risk premium) that made this type of analysis more attractive.
Stocks

Nomad Investment Partnership

  • The partnership is an investment success story, outperforming the index by +14.3% per annum for thirteen years (2001 – 2014).
  • Although all are worth your time, this is nice blog post that pulls out some of the most interesting quotes and ideas. There are many.
  • “One trick that Zak and I use when sieving the data that passes over our desks is to ask the question: does any of this make a meaningful difference to the relationship our businesses have with their customers? This bond (or not!) between customers and companies is one of the most important factors in determining long-term business success. Recognising this can be very helpful to the long-term investor.”
Stocks

Apple

  • Fascinating article on how apple is organised.
  • “Believing that conventional management had stifled innovation, Jobs, in his first year returning as CEO, laid off the general managers of all the business units (in a single day), put the entire company under one P&L, and combined the disparate functional departments of the business units into one functional organization.“
  • Apple has retained this structure despite revenues being 40x larger. As the number of employees went from 17k to 137k the number of VPs only doubled from 50 to 96.
Stocks

Intangible Value

  • We covered the topic of the misuse of intangibles by some participants in our innugral blog post.
  • This is an interesting academic paper that corrects this by appreciating that the question is one of developing better valuation metrics.
  • The authors improve on the classic value factor by adding intangible assets (based on cumulative SG&A spending) – creating a new and better performing valuation measure.
Stocks

Airbnb

  • The stories of the early days of Airbnb, who recently filed to go public, are the stuff of legend including how the founders turned to selling themed cereal to survive.
  • The cereals were called “Obama O’s, the Cereal of Change,” and “Cap’n McCain’s, a Maverick in Every Box.” – a throwback to their first success housing delegates of the Democratic National Convention in 2008. It was also what got them a spot on Y Combinator.
Stocks

Analysing Impact of Covid – History

  • Although the events of 2020 are in many ways unprecedented one can look at the 2002 SARS outbreak in Asia as a possible analogy, after all it involved a lot of people in China staying at home.
  • Netease, a gaming company, was one of the few publicly listed stocks that reported financials at the time.
  • This table (h/t Selcouth Capital Management) shows what happened to quarterly financials at Netease at the time.
  • Netease saw a huge boost to revenue and a re-rating. Yet, eventually revenue slowed against tough comps and the stock deflated.
  • Will the same happen to the current crop of beneficiaries?
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