A few takeaways from the Morgan Stanley 7th Annual Swiss Watch report:

Polarization continued the Big 4 (Rolex, Patek, AP and Richard Mille) gaining share (+200 bps) and capturing 44% of the market (vs 36.9% in 2019) Rolex became the first Swiss watch brand to surpass CHF 10bn with 30% estimated market share

"No other luxury brand can claim such a dominant position in its respective sector. For example, Louis Vuitton had a market share of 'only' ~19% in the luxury handbag market last year."

$BRK released its First Quarter earnings on Saturday.

As usual, all the juice is in the 10-Q. Here are some highlights:

Operating earnings (defined by $BRK) were up 13%
Adjusting for certain items (amortization, FX, one time items, acquisitions) operating earnings increased 21% Most of the strength is attributable to insurance, with underwriting profits up >5x and investment income +68% given higher interest rates.

BNSF and BHE earnings were both down 9%

The industrial and services group saw strength, while consumer and building products were weak

Interesting recent VIC Writeup on $NTDOY by 08ird (short summary):

"Nintendo has already expanded its operating margin from ~4% in FY15 to ~35% today. Incredibly, its stock has hardly seen any multiple expansion, despite numerous value-unlocking events that have happened." "Our first, and most critical assumption, is that the Nintendo Switch should be viewed as an “App Store Platform” that is in the midst of a secular growth of digital purchases. More than half the number of games sold on the Nintendo Switch are from third-party publishers."

$BRK 2Q Highlights

Operating earnings up 19% (ex FX gains from non USD debt) to $8.2B

Notable strength in railroad (+10%) and insurance-investment income (+56%) mainly from higher rates and dividends Buyback for the quarter ~$1B, all of it in June when the stock traded as low as ~$270. Average price paid ~$280 per B share.

Notably, looks like another ~$1.4B was bought between July 1st and July 26 (bottom of the 1st page of the 10-Q), at similar prices

A look back at my 2021 Substack journey📝

I write about topics that fascinate me, which don’t get enough attention and where I think I can say something valuable.

I also aim for a long shelf-life and have no publication schedule (quality>quantity)

My 7 pieces from this year👇 1. Spotify’s Third Act

My first piece examines $SPOT ’s venture into Live Audio with their acquisition of Locker Room, and speculation of what could come out of it.

(disc. long)

sleepwell.substack.com/p/spotifys-thi…

$CSU.TO Announces Formation of Venture Capital Fund

-Invest in businesses that have the potential to become standalone business units within CSI
-Objective is to develop organic growth processes which can eventually be rolled out more broadly by CSI

csisoftware.com/docs/default-s… “Organic growth will be a critically important part of CSI's enduring success. TOG has one of the best track records of sustained organic growth at scale that I’ve seen in the VMS industry” –Mark Leonard

h/t @invertir_blog

By way of a request, here’s the 5 best things I read today

https://twitter.com/SleepwellCap/status/1463932745952989192

1. $ITW WSJ Article from 2007

h/t @Negative_GW

wsj.com/articles/SB117…

$CSU.TO Decentralized M&A $CSU.TO How do you train a solid investment team and what are the skill sets for deploying capital?

Sell-Side Equity Research gets its fair share of criticism from investors, but it’s also a good training ground where you can learn about the investment process and become a better investor.

Here are 10 things I learned during my time on the sell-side

👇🧵 1. Writing

Putting your thoughts into paper forces you to think more clearly and organize your arguments and conclusions. There’s no better way to crystallize your thinking than by writing down what you think, and doing it on a weekly basis creates a very powerful lasting habit.

Take a break from earnings.

Here I’ll highlight some companies that did massive repurchases over time.

Friendly reminder to account for SBC and % of mkt cap when calling any share-repo “massive” and best to look long term.

Let’s take a look at some real cannibals

🧵👇 Moody’s $MCO

A classic capital light compounder and one of the best businesses around. Shares outstanding are down 41% in 20 years.

$SPOT Q3:

-MAU 381mm (+19% y/y, high end of guide)
-Premium 172mm (+19% y/y, midpoint of guide)
-Rev +26% (fx adj)
-Ad-Supported revs up 75% (13% of revs)
-Gross margin 26.7% (up 200bps y/y,above guide)
-ARPU up y/y from price increases
-FCF of 99mm EUR

More details to follow. This is a good print. Let’s dive in.

MAUs DD growth across all regions, back to trend (after 2Q of misses)

Strength in RoW, specifically India, Philippines, Indonesia. Also called South Korea, Bangladesh, Pakistan.

Just in case These are huge population countries.

My views on $FB and why I’m not invested:

Is it “cheap”? Yes, by many measures. It’s an incredible business, one of the best in the world.

But I disagree with most adjustments people make (cash, core/ex blah earnings, WA, growth capex)

I don’t value it that way. Why?

1/n 🧵 As a shareholder you either want cash flows back quickly and in size, or be very patient and get a big payday down the line in return.

Even though you can slice the numbers to make $FB look really cheap, you’re not seeing many of those earnings returned to you

Let’s take a look

$FB revenues up a cool 35% y/y
Total expenses up 39%
EBIT 36% vs 37% y/y

New reporting segments
FoA: Family of Apps (fb/ig/wa)
FRL: Facebook Reality Labs (ar/vr software, hardware, content)

Getting serious about the Metaverse. Let’s try to put all these tech buybacks in context by netting out SBC please.

$FB

$50B buyback announced
$10B SBC
$40B adjusted buyback (~4% of s/o)

Transformation at $ROP expected to keep going.

Would not be surprised if this is a pure software company in ~5 years (~60% today with recent divestitures)

Adding fmr $DHR CEO to the board is a fantastic move who will help on new acquisitions & also brings spinoffs to the table How the Board operates in $ROP

A few highlights from a Global Music Report by @MusicAlly

Mexico:
-Over 60% of all Mexican label revenue came directly from Spotify
-The World’s streaming mecca, according to Spotify
-20mm people use a streaming service, while 80mm people own a smartphone (& quickly growing) Brazil:

Amazon Music passed Deezer to become the second DSP in number of subscribers, behind Spotify, which
has 61% of total subscribers and contributed 45% of all Brazilian recorded music revenues in 2019.

Don’t have a very big Apple hardware user base in the country