1. Home builders outperforming the market has been a head scratcher for many. Here are 5 simple reasons for outperformance.

1. Inventory is still low despite housing demand going through worst demand period in decades.

$NVR, $DHI, $PHM, $LEN

https://twitter.com/beyond_mental/status/1577871512564031490

2. Builders were trading close to Tangible BV a few months ago as markets feared large impairments. With inventory levels still below normal and home prices declining by a LSD%, fair to say that big impairments are less likely to occur. So Tangible BV can be trusted.

A/ Some interesting stats on housing ( $NVR, $DHI, $LEN) from Evercore analyst:

#1 ARM is only 5% of mortgages today vs 22% in 2005.

#2 Even if home prices decline 15%, then only 3.7% of homes will have negative equity.

Therefore, there are no forced sellers in the mkt. B/ #3 While more inventory will come to market, but home prices only decline when inventory level exceed 6 month's supply. We are currently at 3 month's supply.

#4 If builders get units under construction to market, then also hitting 6 month's supply will take a few more qrtrs.

1/ Theoretical potential for loan book growth for banks in EMs can be 2-2.5x of GDP. So, banks have always appeared as a no-brainer way to play the EMs.

But not all banks are created equal, while growing loan book is easy - managing risk is difficult. 2/ Risk is not only driven by the policy and macro volatility but also due to constant govt. intervention & corruption in loan disbursement decisions.

Chinese banks have been a case in point. While China is the 2nd largest economy, its banks are one of the weakest.

1/ What does current valuation of a typical #SaaS name is baking in?

To answer this question, I decided to conduct a theoretical exercise.

$ZM, $OKTA, $TWLO, $FIVN, $NOW, $ZS, $HUBS, $FSLY, $U, $SNOW, $DOCU, $TEAM, $COUP, $RNG, $DDOG, $CRWD, $MDB, $FROG, $SNOW.

Thread 👇 2/ The intent of the exercise is not to determine which stock is expensive & which is not.

Rather, I will leave it to you to decide whether the #SaaS stocks you hold will be able to meet or exceed the revenue and FCF expectations of this exercise.

1/ Mrktplc 1.0 vs Mrktplc 2.0

Mrktplc 1.0 focusd on dmnd sourcing, price discvry, & efficiency 2 deliver consistent exprnc 2 usrs who wr, 4 d 1st tm, using intrnt 2 buy prodcts/servcs.

$BABA, $AMZN, $MELI, $JD - wr built on this underlying idea. Mktplc 2.0 is dfrnt.

Thrd 👇 2/ Mktplc 2.0 focus on monetizing individuality, creativity, community etc.
$ETSY > monetize creative skills
#medium > writers monetize blogs
#TikTok > plat4m 4 bldng persnl brnd
#udemy > teaching skills
$PDD > community

Mktplc 2.0 hs unleashed a slew of internet entrepreneurs.

1/ Specialty cnsmr ingredient (SCI) cos r prt of an oligopolistic mkt wid ~$90bn TAM grwing @ 4%-5%.

SCI stks hv bn lng-trm compounders - outper4mng chem. peers, S&P 500, & consumer staples.

$GIVN, $CHR.CO, $SYIEY r best SCI plyrs (all lstd in Europe).

👇Rsns 4 outper4mance 2/ Rsn #1: Entry Barriers

- CPG plyrs work wid trusted suppliers. Reputational damage of any quality issue is enormous.

- SCI r 3%-5% of total COGS of a product. Once a given ingredient is formulated into a consumer product, recipe stays same 4 life of product.

1. After $ECPG, another boring small cap stock at attractive valuation – its $NOMD.

$NOMD is leader in European frzn food mkt (bigger than $NESN in frzn).

Trades at ~10% FCF yield with a quality mgmt team.

$NOMD is nt a ST pantry load stry but a stable cnsmr stpls story. 2. $NOMD hs dlvrd consistent LSD +ve organic grwth.

LSD org. grwth is like hitting gold in packaged fd, where mst plyrs barely grw (chck $KHC, $K, $SJM).

Frzn wl cont. 2 b grwth category bcz frzn is a) convenient, b) healthy, no additives, & c) less wstg 4 grocery store.

1. $PM rprtd btr thn expctd earnings with a rebound in vol. in June.

I blv $PM has 20%+ TSR ovr nxt 12 mnths with a clear catalyst in form of buyback initiation.

$PM trades at a discount rltive to mkt & its own history. Refer to the thread for my bull thesis on $PM. 2. It is #IQOS - a product 95% less harmful thn cigs, which is 25% of revs.
Regulators love #IQOS & provide favrble tax trtmnt 2 #IQOS – bcz of which #IQOS is ~20% chpr thn Marlboro.

#IQOS hs monopoly in mst mkts with $BAT, $IMB & $JTI struggling to gt their version of IQOS.