Are you buying $TSLA because I saw they shot the lights out & I think @elonmusk is a genius?

Elon certainly is a special guy - he's built the 5th largest company in the world without advertising

But “special guys” are only one piece of the puzzle

Anyway, let’s dive in 2/
Tesla is currently valued at $1trn

And we know “trees don’t grow to the sky”

because planet earth is 4.5bn years old and the highest tree in the world is a Californian Redwood and “only” 115m tall

Let’s also not forget Netflix's reminder to us all that

Congrats, I heard you won $61bn in the lottery

Thanks, I guess inflation has some benefits

What are you going to buy?

I’m thinking shares, I don’t like the negative real yields of bonds & cash

but I’m worried about the macro outlook, so I want the latest info

Well let’s 2/
take a look at 2 companies that reported on Thursday night to see what’s on offer

For $61bn, you could buy 100% of Freeport-McMoran, (#FCX ) the world’s 3rd largest copper miner

sounds interesting, I know EVs use lots of copper

Revenue for trailing 12 mths (TTM) was $25bn

The Baupost Group Billionaire, Seth Klarman, looks for security “mispricings”

and since he runs one of the world's largest & most successful hedge funds, he’s worth listening to

Shortly after arriving in the UK, 20 yrs ago, I met a “dodgy landlord” (his words)

and I asked 2/
him how he made a decent living with rental yields at 3% - 4%

He told me he only bought properties:
- at auctions (deceased estates / repossessions),
- on rainy afternoons,
- during winter

and because the season & weather & cash requirement of auctions dissuaded & excluded

If you were a CFO & wanted to show the highest cash balance at Qtr end, what would you do?

I’d sell every inventory item I could for cash,

collect every debtor possible,

and tell all my creditors that "supply chains are still a nightmare" but

the “cheque’s in the post”

and 2/
forget to tell them it’s dated for 1st of the new quarter

Exactly!

You delay paying your creditors until after qtr end

Now put your analyst hat on to discern the "truth" from the balance sheet

What, look for more than the words, “beat” or “miss” on briefing. com?

YES!

At the start of my career, I had the privilege of working for Bryan Hopkins at Old Mutual Asset Management

Bryan was a former Accounting Professor and he taught me a trick that I use regularly

He said, “always look at cumulative cash flow over a number of periods because 2/
cash flow in any one discrete period can be misleading. Cumulative cash flow is closer to the truth”

He’s right

From time to time, I see fund managers referring to a company’s high free cash flow yield over 1 year, but sometimes it’s due to falling inventory as working

Now we all know that Jay is on a mission and isn’t letting high oil prices hold back his rate rising intentions,

all of which should be good for Value,

I’ve got a plan for the large Growth index constituents who want to stay relevant and be included in the Value index 2/
Don’t worry, this is free advice so Warren B can relax

(sorry Goldmans)

So, what’s the plan?

Just go out there & buy anything

but make it big and pay up

Don’t worry about paying huge goodwill numbers or if it slows your growth

the more goodwill & slower the growth,

Long term followers know one of my bugbears is Naspers / Prosus Management’s complete failure to unlock value for the SA savers

I don’t read much fiction and that's a good thing - you couldn’t make this story up

In April ‘21, Prosus sold 192m Tencent shares (2%) for $14.6bn 2/
Tencent today is 20% lower today - full marks?

No, 2/10

Why?

They lose 3 marks for agreeing not to sell any more Tencent shares for the next 3 yrs

so suffered the 20% hit on their remaining 29% stake

and stay exposed to the whims & fancies of the Chinese Government

Would you ride in a driverless car?

According to Morning Consult, only 16% of respondents are “very likely to ride as a passenger in an autonomous vehicle,”

Waymo, owned by Alphabet (Google), has driven billions of miles in simulation & drove 20m miles in 25 US cities in 2020 2/
They’ve only had a few minor accidents since launch

So, “yes”, I would ride in one of their driverless cars but with one proviso:

It must be “on-grid”

No problem because Waymo's vehicles only operate within pre-mapped zones called “geo-fenced” areas

and only in

Alexa, what was Amazon’s free cash flow over the past yr?

Amazon suffered a Free Cash Outflow of $14 bn for the trailing twelve months

Alexa, what was the Stock-Based-Compensation compensation expense that was added back and without which the outflow would have been worse? 2/

$13bn?

Alexa, I believe Amazon earned a non-cash gain of $11.8bn on a revaluation of their 18% stake in Rivian, the EV manufacturer. Is this correct?

Yes

Alexa, what was Rivian's market cap on 31 December when this gain was booked?

$93bn

Alexa, How has Rivian’s share

Imagine losing $50bn in an hour or $210bn in 6 months

More than the annual GDP of 140 countries

A hit taken by some 2453 funds according to Whalewisdom

A top holding in some of the best performing funds of yesteryear

and many Passives

Whoosh, gone up in smoke

permanent 2/

loss of capital

What on earth happened?

They disappointed – earned $1.11 for the quarter (adjusted of course)

against a forecast of $1.12

3% eps growth

And guided $4.75 ish for $2022 when the estimate was $5.23

50c miss cost $50bn

The mad rush this morning by investors

Ever heard of Nicolai Tangen?

Well he made the front page of the FT yesterday saying he was the,

“Team Leader for Team Permanent”

For people like me who believe the inflation genie is out the bottle and will probably stick around - permanently

I’m nominating Russia’s Central 2/
Bank Governor, Elvira Nabiullina, as Co-Leader because she warned us about this in an FT article in July last year saying,

“Sharp rises in food prices had “de-anchored” ordinary Russians’ inflation expectations and

….run the risk of panic buying to get ahead of inflation

1/
Storm Arwen brought heavy weather & darkness to Northern UK this week

Investors in Hedge Fund favourites will know the feeling with the Goldman's VIP index down 4.2% over the past 5 days

Other than GoDaddy which is up 2.4% and 3 others,

the rest have Gone South (Daddy) 2/

Elastic snapped -24%

Square, Alibaba & Shopify refunded -10%

Sea, Salesforce, Uber, & Meta (should have gone with Faceplant ) was unliked -9%

It had to happen – only days ago, Bloomberg reported:

“Hedge Fund Perma Bear Clark shuts down amid historic bull market”

1/
I looked up Equity #ETFs with #ESG in their description using the Bloomberg function, "ETF"

$334bn in total AUM

Wow, investors are hungry for this

so took a “deep dive” into the largest - $22bn iShares ESG Aware MSCI USA 2/
“composed of U.S. companies that have positive environmental, social & governance characteristics as identified by the index provider”

“.. that applies the following business involvement screens:

civilian firearms, controversial weapons, tobacco, thermal coal and oil sands”

1/
Imagine I told you in early June that $100 invested in an old discarded coal company would be worth $286,

while $100 invested in a Chinese darling, BABA & Tencent, both rated “BUY” by over 90% of analysts & forecast to grow earnings forever & beyond,

would fall to $77 & $ 81 2/
In 3 months

I think you may have sent me a get-well-soon card and muttered

“some people just don’t want to get it”

Is there a lesson in here?

Yes, it reminds us that the future is unpredictable

Which means the common narrative might not play out

1/
Can I tell you about a company that grew Adjusted EBITDA 8x in H1 & is below 3x earnings?

Grew? I thought you were a Value guy

I am

And we want growth

we just don’t want to pay too much for it

What’s with the EBITDA reference, I thought you don’t like that metric? 2/
I don’t really

Because companies with a huge & unaffordable interest bill can look great with Earnings BEFORE Interest…

They just look shoddy afterwards

But I look at EBITDA because it shows me a different angle

Like looking at yourself in the mirror at various angles

1/

In 2001, I arrived in the UK eager to look at leading global companies

One was GE, led by the late Jack Welch, who had just published a book, “Jack: Straight from the gut” about his “career running one of the largest and most successful corporations”

The stock sold at 2/

15x earnings - seemed fair value for a “wonderful business run by brilliant management"

Cash from operating activities of $32bn less capex for equipment of $15bn = free cash flow of $16bn

(although we didn’t talk about free cash flow back then)

ROE was 27%

1/

If you’ve spent recent days trying to guess the moves of Chinese Govt, you may have missed Australia’s largest-ever deal

US$29bn

No, no one acquired Newcrest, one of the world’s largest gold miners at a 70% premium

Square bought, “Buy now, pay later” company, Afterpay AP 2/

They must have some unique technology

No, but they do have a great Vision

“Fairness and Financial Freedom for all”

and Visions aren’t cheap

Well I value Fairness & Freedom

But does Square get anything else for $29bn?

They get 4 values:

Keep it real

Do the right thing

(thread)

In October 2003, one of the World’s wealthiest men flew home in his Gulfstream

As he disembarked, he was arrested at gunpoint, sent to a remote prison beyond reach of journalists, charged with tax evasion, & spent the next 10 yrs in a Siberian gulag

He is 2/

Mikhail Khodorkovsky (MK), the CEO of Yukos, one of the world’s largest oil companies at the time

But unfortunately for MK & Yukos, this wasn’t a televised Olympic Judo contest where a neck lock ends with a double tap

This was an: out of sight, zero-rules, cage fight

1/

Let me tell you a story about a company whose share price has risen 50x since 1999

Compound growth of 19% for 21.5 years

Wow, a tech company?

No, a retailer

on-line?

No

Well, then they must have opened lots of stores?

At a rate of 4% per annum so 3x the store base, 2/

not 50x

So they’ve increased sales in each store?

barely changed +1.5% CAGR

Ok, a massive increase in profitability per store?

Some – grown at +4% CAGR – increased efficiencies & operating leverage of spreading the fixed costs across more stores

Still doesn’t

1/ I took a look at the prospectus of the 2nd largest, US IPO by a Chinese firm - Didi

You know, the taxi company

My apologies, the “Mobility Technology Platform”

If you can make it emotionally past the teary Founders’ letters about memories of, a wintery night in 2012 with a 2/ "jacket that was no match for the wind”

and

“the gnawing anxiety of being stuck somewhere (with 3 children) on a rainy day or snowy night with no way to get home..”

you’ll see they dropped $1bn from operations in the 3 months to March

We’d all surely be better off if