Thread by @compound100x

(1/x) Some observations from this down cycle
- Antifragile companies that get stronger from stress have a lot of “excess” built into their companies, either through a fortress balance sheet (Big tech), counter cyclical business model (NVR),

(2/x) underearning relative to value provided (NFLX, AMZN, GOOG, Tencent) or culture of agility (SPOT). These companies have outperformed YTD, but many also over the LT. We should not demand to own these only during periods where we seek defense because we never know

(3/x) what and where risks can come from. It thus makes sense to own these selected group of companies 100% of the time
- Some companies we thought were durable but turns out not to be. Boeing, despite being part of duopoly, was more fragile than antifragile.

(4/x) Capital structure was too optimised, capex instead of opex, thus cyclical, though COVID is a blackswan

- Digital staples, like physical staples are holding up decently well (Streaming video/audio, gaming, cloud)

(5/x)
Businesses getting stronger through this cycle, reinforcing brand equity:
- JD, Tencent, Baidu: All provided rapid support in their own ways
- BKNG: free cancellation for all customers. Hotels are not happy and ideally BKNG should try to balance and offer some help

(6/x) for the hotels. But ultimately, customer is king and BKNG’s actions to prioritise customers increases brand equity over LT
- LVMH: repositioned perfume factories to produce sanitisers
- Moncler: donated EUR10m to build emergency hospital in Italy

(7/x) - Grocers, food delivery, e-commerce, healthcare companies all doing their part

Businesses damaging brand equity:
- Disney: unlike Apple that took initiative to shut all stores ahead of country bans, Disneyland is now famous for packed parks even as cases were esclating

(8/x) in US and many calling for them to shut it
- Theatres: same, lacking initiative, some probably still open now
- Cruise liners: “free beer if you don’t cancel on us!” offers were going out when Princess cruise was struggling to find a place to dock with a ship full of

(9/x) infected customers..

Companies that were slowest to respond to COVID threat, even when it was clear their customers would be at risk were those in catch 22,

(end)

..largely caused by a geared balance sheet that would struggle if they did what was right and best for customers. We should avoid such companies going forward