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Ensemble Capital Profile picture
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Mar 19 • 4 tweets • 2 min read
This is a pattern across many aspects of the US economy. Rather than current levels being high, in many cases the real issue is that the levels post GFC were very low. 1/4
This debate isn’t actually new. Whether the New Normal, low growth of the 2010s was a permanent secular trend or a decade long hangover from the Financial Crisis was a live debate prior to COVID. 2/4 intrinsicinvesting.com/2018/08/23/ret…
And you can’t understand the current inflation debate without taking into account the way that the New Normal decade caused radical reductions in what economists believe is the potential economic output of America. 3/4 intrinsicinvesting.com/2021/06/11/inv…
New economic events always occur within a particular context that was set in motion years ago. The resolution of current economic debates rests very much on whether the 2010s were indeed a New Normal, or if they were a low growth aberration triggered by the financial crisis. 4/4

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More from @IntrinsicInv

Ensemble Capital Profile picture
Mar 19
1/25 You can’t predict the economy, but understanding the macro context is critically important for bottom up stock pickers. Whether you like it or not your company specific outlook includes a ton of implicit macro assumptions.

The current macro situation demands your attention.
2/25 A lot of company level forecasts are just a form of trend analysis. Most macro trends are usually long duration and slow moving, so you just need a sense of whether macro drivers are above/below mid cycle and how soon/much they might mean revert.
3/25 In a typical cycle, while there are early, mid, and late cycle companies (those that thrive best at various points), all companies are operating within a relatively homogeneous economic context.
Read 25 tweets
Ensemble Capital Profile picture
Feb 16
[New post] Pricing Power and Inflation (1/n) intrinsicinvesting.com/2022/02/16/pri…
"Pricing power doesn’t mean raising prices in an inflationary environment. When consumers expect higher prices on their regular purchases, companies with and without durable competitive advantages can raise prices without much concern for losing business." (2/7)
"[True] pricing power is the ability to confidently raise prices at times when your competitors need to have a prayer session before they would consider raising theirs." (3/7)
Read 7 tweets
Ensemble Capital Profile picture
Jan 24
A thread, 1/9: In our just published post, we offer a deep dive into Netflix's recently announced results and guidance. We do not believe that the evidence supports a wholesale reevaluation of the company's growth prospects. intrinsicinvesting.com/2022/01/24/net…
2/9 Q4 results ranked alongside the company's best quarterly subscriber additions, setting aside the massive additions seen in the early days of COVID while the world sheltered in place at home.
3/9 1Q guidance was clearly week. But also represents a level of subscriber additions reported in 3 of the last 16 quarters. The guidance is weak, not catastrophic.
Read 9 tweets
Ensemble Capital Profile picture
Jan 7
We've recently discussed as a team the impact of internal promotions to CEO versus external hires into the role. When is either a positive or negative signal?

Academic research is inconclusive on the subject. (1/n) gsb.stanford.edu/sites/default/…
Our general take is that the more unique the corporate culture - and assuming it is virtuous - the more an internal promotion makes sense.

In this case, outside CEOs are less likely to be accepted by the existing culture and more likely to want to do things their way. (2/n)
In contrast, external hires make the most sense when the culture is bland/destructive, the strategy is broken, or the company is missing a key set of skills.

Ex here is $CMG where Brian Niccol brought in operational and tech expertise after CMG's foodborne illness crisis. (3/n)
Read 4 tweets
Ensemble Capital Profile picture
Jan 6
It's hard to believe we started Intrinsic Investing 5 years ago. Sharing our thoughts on investing has greatly improved our own thinking, forced us to better understand our own ideas and triggered excellent feedback from other investors.

A thread of some of our top posts of 2021
We started the year laying out our portfolio construction/position sizing framework in detail. intrinsicinvesting.com/2021/01/05/pos…
We looked at how business quality, not just paying a low price for a stock, is a form of "margin of safety". intrinsicinvesting.com/2021/01/13/the…
Read 12 tweets
Ensemble Capital Profile picture
Nov 5, 2021
One of the more challenging aspects of investing in consumer businesses, especially ones that make products that you yourself enjoy, is separating your personal feelings from the investment thesis. Not easy to do.
To be sure, there's value in having an "inside" view, but it can go too far or be misguided, especially if you are not the incremental customer.

There had to be a few die-hard fans of Kodak photographic film who just didn't understand why people were flocking to digital.
Alternatively, those with a strong "outside" view risk being too dismissive of, or not realizing, certain factors that add value.

You might think Starbucks coffee tastes bad, but there are 24.8m Rewards members in the US that disagree and account for 51% of sales.
Read 4 tweets

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