Just saw this really interesting piece by Bridgewater Associates on the Top 10 companies in each decade and their subsequent performance.

One thing to note is that many stocks stayed in the Top10 for 30-40 years, so just becoming one of the largest companies doesn't mean it is a bad stock going forward.

More points below 🧵👇

1/10 ✅ “While the timeline of each cycle is highly uncertain, the vast majority have eventually succumbed to new entrants. Some have gone to zero; some are still relevant today but have underperformed the broader market.”

2/10

A thought-provoking piece by @HorizonKinetics on the risks faced by US markets, passive investing and some top ideas:

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The US has benefited from BIG, momentous events.

1️⃣ “The first economic miracle for the U.S. was the collapse of the Soviet Union and a hard commodity supply surge.”

1/12 2️⃣ “The second massively disinflationary force, beginning in 1979, was from China, which faced a similar economic circumstance and was likewise in desperate need of foreign exchange. Lacking commodities to sell, the country could only offer the world market its greatest resource: human capital. That extremely low-cost 1-billion-person labor pool enabled a massive global labor arbitrage.”

2/12

A few interesting stock ideas from Barron's mid-year roundtable 🧵👇🏽

1⃣ $SLB - 12.8x this year’s estimated earnings, and 11x times next year’s estimate. 17% ROIC (23% ROE). $7B will be returned to shareholders via divs and buyback in 2024-25 (over 10%). The stock got penalised because SLB agreed in April to acquire Championx, which specialises in production chemicals, drill bits, and drilling technology. SLB paid about 14 times earnings, and Championx has been compounding earnings at 15% a year.

1/8
2⃣ $RNR- $11.8B mkt cap, 5.1x P/E, ROE - 25% (Debt/Equity - 0.2). The investment portfolio of $29.6B has a 5.8% yield with a 2.6-year duration. In November, RenRe closed on the purchase of Validus Re, the reinsurance business of AIG. It paid about $2.98B, or 1.14x book. In Q1, Validus was able to raise prices about 8% year over year. In the regular RenRe business, the company raised catastrophe reinsurance prices by about 20%.

2/8

A long read on #LVMH by Bloomberg.

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✅Over the past 40 years, Arnault has assembled the world’s largest luxury conglomerate and globalized a sector once constrained by the limited ambitions of family-owned European companies encrusted in tradition.

1/9 ✅Arnault has dressed royals and presidents, supermodels and celebrities. Perhaps more than anyone else, he’s made the clothes and accessories that signify status among the global elite—and project a bit of their insecurity, too.
2/9

Enjoyed this interview with @BobRobotti by @WilliamGreen72. A few insights on the energy transition, copper, fertilisers, industrials and value investing in general.

Some of my notes 🧵👇🏼

✅“Investing is a mosaic. There's a lot of things you look for and you don't necessarily have to have all of those pieces for it to be a compelling investment opportunity.”

1/11 ✅“We frequently find that we buy too soon and the value becomes troubled. And if the price discounts more, then I have a recurring pattern of I buy more."

✅"The stocks that we made the most amount of money in over time are the ones that initially after our purchase, disappointed and traded down. So the idea that somebody has a rule of thumb that down 20% I'm out of stock and move on, that's not existed in our conversations.”

2/11

My notes on Howard Marks conversation with Nicolai Tangen.

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➡️Where are we in the cycle?

“I think we're a little bit above fair value, but not so high that a decline is predictable or dependable. [Today] people say that they're the most uncertain they've ever been. In my book, that's healthy.”

@HowardMarksBook

1/12 ➡️On AI:

“Most bubbles surround something that's new, and this one does, and something that everybody's very impressed by. [But] I don't know enough about AI to know if this is excessive or justified.”

2/12

An insightful piece by @mjmauboussin on Market Concentration.

"Many investors have a sense that concentration is too high because it has risen sharply from a much lower level. But perhaps we should ask whether concentration was too low before."

Key points 🧵👇🏽

1/7 ✅"The S&P 500 has delivered returns above the average when concentration was rising and below the average when concentration was falling."

2/7

A great piece by Lindsell Train.

Makes you focus on what really matters in investing.

1️⃣ Long-term compounding (earnings growth) vs stock P/E.

1/4 2️⃣ “ Most people are biased towards confirmation, to embrace the positive feedback of a share price going up. Rising prices (and, with the benefit of hindsight, peak valuations) imply successful approaches and quality companies.”

2/4

Some interesting points from Druckenmiller's interview with @CNBC in May 2024

➡️Cautious on AI in the short term, but bullish long term (cut his $NVDA position in March)
➡️Bullish on Copper, Argentina and Japan
➡️Not investing in China under current leadership

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1/6 "If we were all sitting here in 1999 talking about the Internet, I don’t think anybody would have estimated it would be as big as it got in 20 years. And yet, if you bought the Nasdaq in ’99, it went down 80% before that all came to fruition. That’s not going to happen with AI. But it could rhyme – AI could rhyme with the Internet as we go through all this capital spending we need to do. The big payoff might be four to five years from now. So AI might be a little overhyped now but under-hyped long term."
2/6

I have published a short note on the UK stock market.

It is extremely cheap in absolute (close to 2009) and relative (widest discount to US) terms. It is equally cheap when adjusted for different sector weights.

But what is the most exciting is that things have started to change.

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1/5

✅ Almost half of companies have launched buybacks - record high.

✅ 64 bids for UK companies in 2023 vs 40 on average. YTD deal value as high as in 2018.

2/5

Top energy stocks from the Barron's Roundtable:

1⃣ $APA - 17% earnings yield, plus $13/share (over 40% of the current share price) in assets that currently aren’t producing FCF (e.g. discoveries off the coast of Suriname, an LNG contract with Cheniere) + net operating losses that can shield taxes.

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1/4 2⃣ $KOS - 5x PE / 20% FCF yield. Additional LNG assets that will start contributing later ($3 a share, 50% of the current price). Plans to reduce debt first, then launch buyback later.

3⃣ $AES is a huge U.S. developer of clean energy. It has worked extensively with the hyperscalers. We’d expect the company to announce much faster growth in clean energy. Today, AES looks more attractive than the nuclear players.

2/4

Joe Tsai, co-founder and chairman of Alibaba, recently spoke to Nicolai Tangen CEO of Norges.

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✅“When we look internally and kind of self-reflect over the last several years, we have fallen behind because we forgot about who our real customers are. Our customers are the users that use our apps that are shopping. And we did not give them the best experience.”
$BABA

1/12 ✅“The first thing we did was to acknowledge mistakes. We've acknowledged that in the past, we might have not focused on our user experience. The second thing is to reorganize our personnel, change the organizational structure that fits the strategy.”

2/12

Ray Dalio highlighhts five issues about China’s economy and makes his conclusion about investing there.

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1 | “There are big debt and economic problems that are depressing economic activity, prices, and psychology.”

1/6 2 | “The internal wealth gap and the resulting conflict over wealth and values are intensifying, which is fear-inducing.”

2/6

Sharing the "Lessons from 30 years of investing" by Francois Rochon, his presentation at the 10th Value Spain conference.

My favourite quote:

"Holding on to a company that is reporting bad results or going through serious troubles is not patience. It is denial.”

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1/6
➡️How NOT to beat the market

1 | Invest with the same time horizon as other investors (holding period less than a year)

2 | Own lots of companies so you don’t differ too much from the average

3 | Be certain not to be left out of the current fashion/fad/trend (crowd following)

4 | Believe that you are ‘smarter’ than others and can predict the stock market

5 | Keep some level of cash (that inevitably will underperform equities)

2/6

Enjoyed the latest by Jeremy Grantham. He is cautious as usual, but it never hurts to get a range of opinions.

"If margins and multiples are both at record levels at the same time, it really is double counting and double jeopardy – for waiting somewhere in the future is another July 1982 or March 2009 with simultaneous record low multiples and badly depressed margins."

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1/5 Four assets that are less overvalued:

1/ Quality Stocks
"AAA bonds return about 1% a year less than low-grade bonds – everybody gets it...In bizarre contrast, the equivalent AAA stocks, with their lower bankruptcy risk, lower volatility, and just plain less risk, historically have delivered an extra 0.5% to 1.0% a year over the S&P 500...What on earth is that?"

2/5

GS put out a strategy paper on Market Concentration recommending more international exposure and a group of Ex Tech Compounders (ETC)

Key points and charts

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1/7 1/ The share of equity market capitalisation relative to GDP has risen steadily in the US, although not so in the rest of the world

2/7

Just finished flipping through the UBS 2024 Global Investment Returns Book - a pretty good read.

Here are the seven points I found the most interesting:

1⃣ The global history of stock market performance highlights two biases: survivorship and success. Investors in some countries lost everything, and “if these countries are omitted, there is a danger of overstating worldwide equity returns.”

🧵👇🏽 "Russia was a large market in 1900, accounting for some 6% of world capitalization. Austria-Hungary was also large in 1900 (5% of world capitalization) and, while investors didn’t experience total losses, in real terms, it was the worst-performing equity market and the second worst-performing bond market of our 21 countries with continuous investment histories."

2/9

One of the best letters (yet again) by Warren Buffett, starting from the tribute to Charlie, key investment principles and business review.

Most notable quotes 🧵👇🏽

1⃣"Charlie was the “architect” of the present Berkshire, and I acted as the “general contractor” to carry out the day-by-day construction of his vision. Charlie never sought to take credit for his role as creator but instead let me take the bows and receive the accolades."

1/16
2⃣ $BRK shareholders: “investors who trust Berkshire with their savings without any expectation of resale (resembling in attitude people who save in order to buy a farm or rental property rather than people who prefer using their excess funds to purchase lottery tickets or “hot” stocks).”

2/16

AQR put out a good piece that puts last decade’s US stock returns in historical context to set the expectations for the decade ahead.

Here are the key points:

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1/11 Over the last decade, the excess-of-cash return on the S&P 500 averaged 11.9% per year. Relative to history, this is an exceptional outcome-well above the 90th percentile of rolling ten-year performance across global developed equity markets since
1950. The risk-adjusted return, Sharpe ratio, was 0.82, nearly double the postwar average.

2/11

Top 10 trends to watch in 2024 by Ruchir Sharma (chair of Rockefeller International, ex MS strategist):

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1️⃣ Democracy in overdrive

“46% of the global population will have an opportunity to vote in 2024, the largest share since 1800 when such records first began.” 2️⃣ “Even if inflation fades further, investors probably will demand something extra to keep absorbing the huge supply of government bonds. That means interest rates, long-term rates in particular, will not fall anywhere near as much as they did in previous disinflation cycles.”

GMO makes a strong case for the Japanese small caps, forecasting 12% annual returns over the next decade, the strongest performing asset class.

Here are the key arguments and drivers

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1/8 ✅ The 3 key drivers include 4% real returns for the broader Japanese market, 4% alpha in small caps and 4% from Yen strengthening vs USD.

✅On top of this, four recent policymaker initiatives should provide support for company fundamentals and shareholder returns.

2/8