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Tiho Brkan Profile picture
@TihoBrkan
Sep 15, 2020 • 12 tweets • 3 min read • Read on X
1/ One of the strangest things, at least for me, to read on FinTwit is the following statement:

“Even though stocks are expensive, bonds yield next to nothing, so there are is alternative.”

Umm 🤔... yes there is.

They are called alternative assets for a reason.
2/ • single family & multifamily RE
• self storage & multi-use property
• precious metals
• precious metal mining companies
• litigation financing
• invoice financing
• senior private credit
• private equity & venture capital
• art & collectables
3/ • construction senior debt
• construction mezzanine debt
• agricultural private equity
• farmland (grains & softs)
• joint ventures & partnerships
• long/short hedge funds
• volatility based hedge funds
• star manager hedge funds
• emerging market tourism RE
4/ • international cash deposits
• infrastructure private equity
• infrastructure private debt
• alternative energy investments
• crowdfunding & peer2peer
• small & medium sizes businesses
• e-commerce private business
• foreign exchange investments
• energy MLPs
5/ I’m sure I’ve missed a lot. Here are some background stories.

A German family I know invest into beef + avocado farms & soybean crops in Argentina.

Gentleman I talked with last week left AU to Silicon Valley with nothing, did a start up, made millions on a successful exit.
6/ My own family focuses on importing high end materials around the world & helping clients build/renovate luxury homes. We also do our own projects, too.

My best friend started a mining exploration company, later expanded it to mining traffic control company. Made millions.
7/ I rent my penthouse in Malta. My landlord owns the whole building, and several other buildings around the island. He made a fortune in multifamily real estate.

I was on a boat sailing local islands last week with a son of a family that made wealth in energy & oil business.
8/ Today I was a on telephone conversation with a gentleman from the States who is interested to diversify his portfolio into UK real estate debt.

My mentor made a fortune in Sydney (Aus) real estate & passed away at an old age with $150 million having never touched stocks.
9/ Ex-client from German made a fortune investing in renewable energy and wind farms. He did projects in Australia, South Africa and few other places.

My ex-girlfriend in HK is half Chinese half America. Her father moved from Boston to Shanghai in 1974, everyone said his crazy.
10/ He ended up making over 500 million and IPO his company on the exchange several years back. Was originally a lawyer, speaks perfect Mandarin & English, had a client called Proctor & Gamble (you might know them) and when he couldn’t find them a fragrance supplier...
11/ ...he ended up started his own company / manufacturing business in Tainjin and eventually grew it to a monster. Never invested in stocks.

What’s the point of the list I made and the stories I shared?

Firstly, wanted to share these stories as inspiration of what’s possible!
12/ Secondly, Wall Street is trying to convince you stocks are the only way to invest.

I have travelled half of the world!& met many successful people. Obviously, I’m still young but I’m yet to meet a person who got RICH of stocks.

No one used shares as a vehicle to success.

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More from @TihoBrkan

Tiho Brkan Profile picture
Jul 20, 2023
Despite a very strong 10-month rally in stocks, most global fund managers are still overweight bonds (risk averse) and underweight stocks (risk seeking).

Some sentiment surveys do suggest bulls are back, but the lion's share of capital (managed by funds) is still defensive. Image
Asset allocation by an average retail investor (AAII) and an average fund manager (BofA).

The sentiment correlation is quite close over the last two decades, but it starts breaking down in 2016.

We think more & more passive LT indexers, hence retail is persistently bullish. Image
In February of this year 4 out of 5 fund managers expected China's GDP to outperform. We know quite a few investors who held this consensus view, as well.

The Chinese economic GDP has disappointed since. Today, only 1 out of 5 fund managers believe China's GDP will reaccelerate. Image
Read 5 tweets
Tiho Brkan Profile picture
Jul 2, 2023
1) Global economy has completely changed since the 1970s.

Today, intangible asssts (brands, patents, software, licenses, IP, etc) are twice as large as tangible assets (factories, plants, etc), which dominated the company investments 50 years ago.

This has many consequences.
2) Intangibles are expensed via the P&L statement, so they often don’t show up on the balance sheet the way tangible assets do (they are capitalised via cash flow statement).

Now, think how framing an investment as an “expense” will have a meaningful on financial metrics.
3) Intangible investments artificially suppress the net income (all of a sudden you have all these additional “expenses” which are really investments).

Therefore the P/E ratio is becoming obsolete and probably (almost) irrelevant.
Read 17 tweets
Tiho Brkan Profile picture
May 18, 2023
If ROC is higher than WACC, growing revenue adds shareholder value.

If ROC is lower than WACC, focusing on growth destroys shareholder value.

If a money losing business attempts to grow faster by cutting prices to gain even more market share, it leads to an adverse outcome.
How should management think about growth vs profitability?

If the business is generating excess ROC (above WACC) then focus on stable growth is intelligent.

However, if the business isn’t generating excess ROC, the focus should turn from growth to improvement in profitability.
The management teams should refocus on growth drivers only when the cash return on operating capital employed has increased in excess of weighted cost of capital and that is now validated & consistent pattern (not a multi year cyclical event, like with commodity businesses).
Read 5 tweets
Tiho Brkan Profile picture
May 1, 2023
Buffett repeatedly stated that value and growth are two sides of the same coin.

Graham purists (who disregard the asset's quality) commonly fall into value traps, because valuations tell them nothing without understanding the business's growth potential.

Simplified example. 👇🏽
Alphabet $GOOGL currently trades at 15.7x forward operating income.

Is that cheap or expensive?

We think that using such quick-and-easy metrics cannot help us in our due diligence process — it only leads to decision-making errors. Image
Simplified answer:

a) if the business can grow meaningfully from here the current multiples entry will prove to be cheap

b) if the business's economic moats start narrowing abruptly, resulting in disappointing grow and market share loss, it might prove to be a value trap
Read 5 tweets
Tiho Brkan Profile picture
Apr 29, 2023
We are shareholders in Alibaba. $BABA

However, just because we are long the stock does not mean we should turn a blind eye to the folly going on in recent months.

bloomberg.com/news/articles/…
"What the human being is best at doing is interpreting all new information so that their prior conclusions remain intact." — Warren Buffett

It seems Alibaba investors are falling victim to confirmation bias the whole way down the slippery slope, which started in October 2020.
While some disagree, an attempt to pump the IPO by cutting the prices of services is a clear sign of management's short-termism culture and lack of capital allocation discipline.

Artificially generating revenue at any cost is not how most great CEOs and management teams think.
Read 5 tweets
Tiho Brkan Profile picture
Apr 29, 2023
Earnings ≠ Cash Flows.

"A share of stock is a share of a company's future cash flows, and, as a result, cash flows more than any other single variable seem to do the best job of explaining a company's stock price over the long term." — Jeff Bezos (2001)
Warren Buffett on earnings, multiples, time horizon, and cash flows...

"I wouldn’t look for a single metric like relative P/Es to determine how to invest money.

You really want to look for things you understand, and where you think you can see out for a good many years...
...as to the cash that can be generated from the business.

And then, if you can buy it at a cheap enough price compared to that cash, it doesn’t make any difference what the name attached to the cash is."
Read 4 tweets

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