I'm planning to share a couple of threads on $CELH stock over the coming days. Let's start with my take on the stock's current VALUATION as this is what most people are interested in anyway I guess?

I recently shared a very simplistic way to think about the expectations baked into $CELH stock in my recent blog post:

Currently, Celsius Holdings' stock trades at around 5x its sales, with a free cash flow yield close to 3% (or roughly 33x FCF).
Over the last 12 months, Celsius has posted a free cash flow margin of approximately 16.5%. While this is a solid performance, it's worth noting that there is significant room for improvement when compared to its competitor Monster Beverage, which operates at a much higher FCF margin of around 28%.
If we consider the possibility that Celsius can grow its free cash flow margins closer to those of Monster over time, the upside could be substantial.

For a company like Celsius, which generated about $1.5 billion in revenue over the past year, even a modest improvement in FCF margins could lead to substantial gains in cash flow.

For instance, if Celsius were to achieve a 20% FCF margin (still below Monster's current level), this would translate to $300 million in free cash flow on its current revenue base of $1.5 billion.

Given Celsius's current market cap of approximately $7 billion, this implies a P/FCF multiple of around 23-24x.

In other words, Celsius would be trading at a roughly 4% free cash flow yield. In a 4% 10-year US treasury rate environment, that alone is not too bad for a growing company.

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But of course, the attractiveness of Celsius as an investment lies not only in its current FCF yield but also in its potential for growth; growth in FCF on a per share basis.

If you believe that ten years from now, the company will still trade at a 25x FCF multiple — a reasonable assumption given the stability and predictability of the energy drink industry — your expected return as an investor would be the sum of the FCF yield plus the growth rate.

This suggests that if Celsius can grow its FCF at an annual rate of 10%, investors could be looking at a total return of approximately 14% per year (10% growth plus the 4% FCF yield).

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Paycom Software $PAYC used to be a high-flying tech darling and saw its share price soar past $500 in 2021, a 3,571% gain from its debut price of $14 per share in 2014.

Today, $Paycom’s stock is down 74% from that peak and now trading in the $140 range.

In this thread, I’ll explore a) the stock & business performance of Paycom, b) the factors behind Paycom’s stock decline, and c) Paycom’s business model. Chapter 1: Stock Performance

Paycom’s more recent stock performance was truly abysmal!

📉 The stock is down 30% year-to-date
📉 The stock is down 55% over the last twelve months
📉 And paycom’s stock suffered a remarkable decline of 74% from its 2021 peak.

However, longer term, the stock compounded at a rate of 27% annually (!) despite the recent selloff and 10x-ed investors’ money, massively outperforming common indices.

I recently stumbled upon a document titled “The Art of Stock Picking by Charlie Munger.”

I’ve read this document more than 5x this year alone, and each time I’ve come across a new mental model that changed the way I look at investing.

Here are ten of Munger’s “big ideas” 👇 1. Worldly Wisdom and Multiple Mental Models:

Munger emphasizes the importance of acquiring general knowledge across multiple disciplines.

He suggests having a "latticework of models" from various fields like mathematics, psychology, and microeconomics to make informed decisions.

Understanding multiple mental models helps avoid the trap of seeing every problem through a single perspective.

"What is elementary, worldly wisdom? Well, the first rule is that you can't really know anything if you just remember isolated facts and try and bang 'em back. If the facts don't hang together on a latticework of theory, you don't have them in a usable form."

"You've got to have models in your head. And you've got to array your experience both vicarious and direct on this latticework of models."

h/t: @ModelThinkers

Ulta Beauty is THE leading beauty retailer in the US and its stock is tumbling, down 32% since its March 2024 peak. Hence, $ULTA is trading at a historically low valuation!

In this thread, I’ll give you a brief overview of the business (1), analyze Ulta’s moat (2), share my valuation work on $ULTA (3), and highlight some key risks (4). 1) Ulta’s Business Model

Ulta Beauty operates retail stores selling cosmetics, fragrances, haircare and skincare products, and related accessories and services in the United States.

It offers a broad assortment of both branded and private-label beauty products.

Here’s a selected overview of some of the brands sold at Ulta:
Clearly, their target customers are beauty enthusiasts! $ULTA estimates that there are ~70 million Beauty Enthusiasts in the US.
The company’s private label products comprise Ulta Beauty Collection branded cosmetics, skincare, and bath products, as well as Ulta Beauty branded products; and the Ulta Beauty branded gifts.

Ulta distributes its products through its stores, website, and mobile applications.

Here’s an overview of $ULTA’s revenue by category:

Literally everyone is talking about Nvidia $NVDA right now!

Here is a collection of some interesting charts and data points I shared in a video today 👇 Are the "Magnificent 7" is turning into the "Magnificent 1"?

Today, for the first time, I'm revealing my 12-stock investment portfolio, along with a concise 2-line investment thesis for each position. Feel free to roast my ideas!

I used the recently launched @KoyfinCharts portfolio manager for this thread. I think being able to identify the key value drivers for each investment and being able to capture your investment thesis in a VERY concise way is a superpower in the world of investing.

You will frequently come across investment pitches covered in 60-page writeups or a 20,00- word blogpost, but generally speakig, I think nailing your thesis down to 1-2 pages (or as in this thread to just a few key insights) is far superior.

In investing, valuation is EVERYTHING! 💵

I’d argue there are three primary reasons why investors underperform the market:

📉 A) They do not WANT value stocks (this is a phenomenon David Einhorn described in his most recent appearance) or …

📉 B) They do not KNOW how to value businesses or ...

📉 C) They do know how to value businesses, but their hurdle rate is too low.

The problem is that you can buy the best businesses in the world and still have poor results.

Why? Because you overpaid – the expectations baked into the price you paid were simply TOO HIGH.

The stock market history is littered with examples of superior businesses whose stocks have delivered disappointing returns.

The most commonly cited examples may be Cisco $CSCO and Microsoft $MSFT if you bought the underlying stocks during the dot-com bubble (look at the two charts below).

If valuation is so critical, it’s necessary to point out some common valuation myths and pitfalls.

So in this thread, I’ll expose 5 common valuation myths (and if you read this thread in full, I can promise you you’ll be a better investor.
MYTH #1 – The PE Should Be Your Go-ToValuation Metric

I believe, especially among new investors a common mistake is overemphasizing the price-to-earnings (P/E) ratio.

It’s almost natural to start with this metric. This is how most people get started (which is okay).

However, many investors keep relying heavily on the P/E ratio as a sole indicator of a stock's valuation many years after having started.

But eventually, you have to move on!

You have to acknowledge the limitations of this valuation metric.

It doesn’t consider ...
❌ debt
❌ growth prospects
❌ ROIC
❌ depressed margin
❌ one-off effects
❌ industry trends
❌ reinvestment rates
❌ and competitive positioning.

Another pitfall is only looking at historical P/E ratios, neglecting the forward P/E ratio that takes into account future earnings growth.

$NVDA may be a prime example for a company that looked ultra-expensive in the more recent past but due to its stellar business performance, the stock quickly grew into the valuation.

To sum up, when you develop a broader understanding of factors to look at the PE ratio may be a valid option, but solely focusing on low PE stocks is likely a losing strategy.

Inspired by a recent blog post by @ToddWenning, I’ve recently completely overhauled my investment checklist to make the qualitative more quantifiable (“a system for quantifying qualitative judgments”).

Today I want to share my exclusive Business Quality Scoring System with you!

Having such a system is important as it will influence buying and selling decisions as well as position sizing.

It's part of my broader scoring system that also includes:
💡 Business Simplicity
💰 Company Debt
👨‍💼 Management and
🧨 Risks

Today I’ll only focus on the business quality dimension though.

To assess business quality, I further distinguish between …
✅ The width, durability, and trajectory of a company’s moat
✅ General features of “quality” businesses
✅ Past & future growth

For each bucket, I’ve developed a list of questions and you should give the company you are analyzing a score between 0-4 based on the following assumptions:
👉 0 – Very negative score
👉 1 – Negative score
👉 2 – Neutral score
👉 3 – Positive score
👉 4 – Very positive score

To illustrate how it works, let me share how I assessed AND quantified the business quality of Interactive Brokers $IBKR (see next tweet below ⬇️).
Category 1 – Moat:

Moat Width & Depth I: I can say whether the business has one or multiple strong competitive advantages over competitors (which ones?) and I know why the moat is difficult to copy. Are there large (!) barriers to entry and/or barriers to scale?
Score: 3 Points

Moat Width & Depth II: I can say to what degree the business possesses the ability to raise prices without losing customers.
Score: 3 Points

Moat Durability: I can say whether the moat is durable. What are the chances the company can maintain its competitive advantage(s) for decades to come? If I had a pile of cash, could I meaningfully compete in this space against the company, or is the competitive advantage impenetrable?
Score: 4 Points

Moat Trajectory: I can say whether the company’s moat is expanding or shrinking. The direction of the competitive advantage is likely much more important than the moat’s current size and strength!
Score: 4 Points

$IBKR's Moat Score: 14 out of 16 points

Guy Spier is known for having spent almost $700k to lunch with Warren Buffett.

He is a superb investor who’s always on the hunt for undervalued companies and his Aquamarine fund has $200M in AUM.

Here’s a list of his 5 greatest and most educational public appearances (and writings) ⬇️ #1 – Talks at Google (2014)
During his 1-hour presentation at $GOOG, Spier talks about a wide range of topics.

What stood out to me was this 8-point list to build a better investment process:

1. Stop Checking the Stock Price
2. If Someone tries to sell you something - don't buy it.
3. Don't Talk to Management
4. Gather Investment Research in the Right Order
5. Discuss Investment Ideas Only With People Who Have No Axe to Grind
6. Never Buy or Sell Stocks when the Market is Open
7. If a Stock Tumbles After You Buy It, Don't Sell It For Two Years
8. Don't Talk About Your Current Investments

Let's discuss the German microcap stock $ENDOR

I'd like to discuss the current situation with people who are already familiar with the business, so I won't explicitly outline the business model, but instead share some general thoughts and open questions I have (your input is welcome!).

If you're not familiar with the business, this is essentially what they are offering:

I'll try to structure my thinking a bit. Let's start with a few red flags:

1) Is the company structurally impaired?
There is no doubt in my mind that Endor has become a (much?) worse company over the last two years.

1a) Competition has increased significantly!
The products offered by Endor are by far not as differentiated as they used to be.

While 2-3 years ago it felt like Fanatec was the only game in town in the sim racing world, offering a wide range of products, quality DD solutions, and entire ecosystems, nowadays the offerings from competitors like Moza, Asetek, Simmagic, Simucube, and Thrustmaster are getting pretty good too.

1b) The company has lost the trust of (many) customers.
Due to the very serious (!) logistical problems and the incredibly poor customer service, many customers have lost faith in Fanatec/Endor to provide a superior customer experience. Some customers have waited over 2 months for their order and have been unable to contact Fanatec customer services. I can only imagine how frustrating that must have been.

There was (and still is) a real shitstorm online and I wonder how many people didn't order because of these shared customer experiences and ordered from a competitor.

A customer lost once is potentially a customer lost forever.

The question is: If the transition to the new warehouse and the new website is completed, can the company finally deliver an excellent customer experience and gain customers’ trust back?

1c) Management performance has been rather lackluster:
To give just a few examples:
❌ Management was unable to properly manage the chip supply during COVID and in the aftermath of the pandemic and lost millions in revenue as they were simply out of stock.
❌ The aforementioned logistical problems (how hard can it be to fulfill an online order or to get back to customers when they send you an email?)
❌ Building an oversized new HQ (with a go-kart track on the roof) and running the company into financial difficulties.
❌ Forecasts were off

1d) Debt situation
Management has admitted that the liquidity situation is "tight". The new headquarters is expected to cost around €34 million. There are various short-term loans that the company has to pay back.

The balance sheet nowadays appears rather fragile.

The company doesn't have a lot of cash and hasn't been profitable recently.

However, it seems to me that the Black Friday week has been quite successful so far, the banks aren't panicking either, so the debt situation seems to be under control.

2) Worst IR I've ever seen (seriously!)
🚩 Jackermeier not showing up for a scheduled investor conference
🚩 The old CFO not being able to answer pretty basic questions.
🚩 The website is almost always out of date
🚩 Earnings dates are postponed (without prior notice) 🚩 there are literally no earnings dates from time to time. Or the website might say "August 2023 Q2 results", then October passes by and nothing happens. I've honestly never seen anything like it.

Taking all this into account, it's easy to understand why some investors have jumped ship. Some of the bigger fund managers have left Endor because they have simply lost confidence in Jackermeier and his team.

But ... there may still be things to like (see next tweet)
So why even consider investing in Endor?

3) Fanatec's ecosystem: The size of the ecosystem and the breadth of the product mix are unmatched.

The market is probably too small for any other game to offer the same breadth of products?

I'm not even sure PlayStation and Xbox would be interested in licensing to more than two companies (and companies operating at a much smaller scale)?

4) Brand power: Although the brand has lost some of its mojo, I'd argue that Fanatec is still THE simracing brand.

For example, Fanatec's IG account has over 200k followers while Moza Racing is sitting at 56k (on Reddit its 30k vs 15k members in the respective subreddits)

Demand for Fanatec products still seems to be strong despite all the logistical problems and poor customer service.

5) Pricing power and ecosystem stickiness?
BUT ... Can Fantec use its brand strength and translate it into pricing power?

I have my doubts and would like to hear other people's views.

During the Black Friday week, Endor offered discounts they had never offered before (harming profit margins).

The biggest problem is that their products aren't very differentiated. They cannot charge twice as much as their competitors because people would just buy from a competitor. What's Fanatec's moat? I can see why people compare their tech gear to GoPro.
On PC, there are various workarounds for almost every offering these days, so customers aren't stuck in the Fanatec ecosystem - which $ENDOR investors would love to see.

If the ecosystem would actually be sticky, this would make the business model highly attractive, but I think assuming that there is a moat in the ecosystem business model was a mistake.

On Xbox and PlayStation, however, the situation is a bit different. In fact, I read this post from Jackermeier on the Fanatec forum today:
Also, most Fanatec customers tend to buy more than one product (which makes Fanatec’s business superior to other tech gear manufacturers like GoPro).

You'll see images like the one below on Reddit fairly frequently. People ordering >10 items at once. I’m not sure if the average order value was ever revealed, but it must be >$1,000?
Any thoughts on the cost discipline in the industry? Is the level of competition going to drive profits to zero because of the lack of moats? I think this is a big one!

I’ve been investing for seven years now and the opportunity set right now is one of the greatest I have witnessed over those years. That’s especially true for small-cap stocks.

15 charts highlighting why small companies are trading at historically cheap levels:
#1: Russel 2000 vs. S&P 500 total return performance at the lowest level since 2000!

https://x.com/_rob_anderson/status/1723004783492042962?s=20

Joel Greenblatt is – along with Buffett – arguably one of the GREATEST investors of all time!

Fortunately, Greenblatt taught a Columbia Class with the “goal […] to teach the course that I never had and that I wish I had.”

Here are five takeaways from his first lesson in under five minutes 👇🏼
Lesson #1 – Divergence between Prices and Values:
Prices of stocks fluctuate more than the underlying values of companies.

Greenblatt emphasizes that the volatility in stock prices provides opportunities for investors, as values don't change as rapidly.

"I don’t know why prices fluctuate so widely, and I don’t care. I just want to take advantage of it. We could sit there and figure it all out, but I like to keep it simple."

Greenblatt suggests that in the short term (1-2 years), the market is inefficient.

He believes that by doing good valuation work, investors can take advantage of market inefficiencies and be rewarded by Mr. Market.

"If you do good valuation work and you are right, Mr. Market will pay you back. Keep that in mind when you do your analysis."

François Rochon is one of the best quality investors in the world. He is the founder of Giverny Capital and compounded investors‘ capital at a rate of 15.7% annually (vs. 9.9% for S&P).

Five years ago he gave a talk at Google. Here are five takeaways from his presentation that will make you a better investor today ⬇️

(PS: Don’t miss the stock selection process that Rochon shared and will be revealed later in this thread)
Lesson #1 – Long-Term Focus:
Rochon emphasizes the importance of having a long-term perspective when investing. He suggests looking ahead five years or more and focusing on the future growth prospects of a company rather than short-term market fluctuations which are often noisy and influenced by various factors.

By looking at a more extended horizon, investors can filter out short-term volatility and focus on the actual fundamental growth potential of a company.

Put differently, a long-term perspective allows investors to ride through market cycles, giving the underlying strengths of quality companies more time to manifest.

The "Talks at Google" format is a treasure trove of knowledge, bringing renowned experts right to your screen!

Over the last ten years, Google invited some of the brightest minds in finance to its offices to share their wisdom, experiences, and ideas.

Here are my 15 favorite investment talks ⬇️
#1 – Aswath Damodaran: “Valuation in Four Lessons”

Mohnish Pabrai is one of the most famous value investors of the last 20 years.

In 2022, Pabrai delivered a presentation that was a masterclass on business valuation.

Let me break down his 5 key points: #1 – Defining intrinsic value is relatively simple

Pabrai referenced John Burr Williams who in his 1938 publication “The Theory of Investment Value” defined the intrinsic value of businesses as the present value of all their future cash flows, discounted at an appropriate rate… https://t.co/5HAaB13D2Btwitter.com/i/web/status/1…

Warren Buffett is widely regarded as the most successful investor of all time:

$1,000 invested in Berkshire Hathaway 1965 would now be worth roughly $25 million.

Buffett has built his reputation on the principles of long-term value investing and patience. However, while… https://t.co/o5jJpTa4A7twitter.com/i/web/status/1…
One of Buffett’s most famous quotes was first mentioned in Berkshire’s Shareholder letter of 1988:

"Our favorite holding period is forever."

But is it really?

Before we start: Take a guess! How long does Buffett on average hold onto his stock investments? https://t.co/oCN4TimHe6twitter.com/i/web/status/1…

Renowned investor David Einhorn recently made a shocking statement about the state of value investing.

Einhorn argues that value investing is no longer a viable strategy, and is, in fact, dead!

Let’s examine his claims and potential implications for investors ⬇️: In October of 2022, Einhorn gave Bloomberg an interview, in which he stated that he thinks value investing may NEVER come back as the majority of market participants are either unwilling or unable to value a company based on its business fundamentals and future outlook.

Only a few generations ago, investing was mostly limited to wealthy individuals. No longer! Today, digitalization and democratization are reshaping how capital markets operate.

Here are 15 FREE investing tools every investor needs to start using today. #1: ROIC.AI

This website offers you access to 30 years of financial data from 37,000 companies all around the world.

You don’t even need to register to get access to this big library of financial statements.

Have you ever heard of the 70-20-10 rule?

It can be a real game-changer for your investment process and long-term thinking.

So read this thread and adopt this mindset to become a truly successful long-term investor! ⬇️ In my view, most people do poorly in the world of active investing because they cannot handle the short-term nature of stock markets.

Apple $AAPL has been one of the best-performing stocks over the last few decades, creating enormous wealth for its long-term shareholders.

In this thread, I will take a closer look at the three underlying components of the success story of Apple’s stock so that investors... ... understand what they have to look out for when trying to make successful, possibly life-changing investments.

We will take a look at the period between 2006 and 2022, a 16-year period during which the stock’s value increased by 5,818%, a compounded return of 29%...

Understanding the importance of return on investments metrics is so important, yet few people actually get it.

And it's not even that difficult to understand.

So let me illustrate how ROIC and growth are interconnected with a few examples 👇

1/4 The average US firm has generated ROIC (Return On Invested Capital) of about 10%.

In order to grow 5%, a company with a 10% ROIC needs to reinvest 50% of its earnings (0.1*0.5=5.0%) and therefore only the other half of its earnings could be distributed to shareholders.

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