Hidden Value Gems
@HiddenValueGems
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Value investor || Author of a Real-money Investment Newsletter || Value ideas in less researched markets || Top 100 Business Biographies (free)
London, UK
Joined October 2021
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My latest post 👇🏼
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I rarely pay attention to macro forecasts. I’d rather spend time looking for great businesses selling cheap.
However, one person I listen to on macro is Stan Druckenmiller. Just finished listening to his presentation at the USC 🧵👇
1/15
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A good chart on how narrow the US market has been this year 👇🏼
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70 per cent of wealthy families lose their wealth by the second generation, and 90 per cent by the third (Vanguard).
More than £100bn is now inherited and gifted in the UK each year. That number has been doubling every 20 years.
Around $10.6tn of wealth will have been
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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
🧵👇🏽
1/6
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Peter Brown, CEO of Renaissance Technologies, the most successful quant fund in history, on the ‘secret sauce’ of their investment process and the Five Principles they follow.
🧵👇🏼
1/8
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I realise $NVDA reported blowout numbers yesterday closing at ATH.
But here’s a company with $1bn FCF and zero net debt in 1H23, valued at just $2.4bn. Pays $200mn dividend plus some buybacks.
$HBR.L
#stockstowatch
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Does anyone know who is this genius who presented $NVR stock in the Value Investors Club back in 2001 (!) ?
goes by the name of Charlie479...🤔
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I published a long post on $BABA yesterday.
Here are the key points:
➡️It is obviously extremely cheap, with Cash and Investments accounting for 64% of the market cap. The core business is thus valued at just $72bn (5.8x EV/EBITA).
But here are my issues/concerns
🧵👇🏽
1/9
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Another great piece by
@mjmauboussin
on the importance of pattern recognition for investors: when it works and how to improve it.
11 crucial points that caught my eye:
🗒️👇🏽
#DecisonMaking
#Investing
1/13
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Just saw this really interesting piece by Bridgewater Associates on the Top 10 companies in each decade and their subsequent performance.
One thing to note is that many stocks stayed in the Top10 for 30-40 years, so just becoming one of the largest companies doesn't mean it is a
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$BABA stock is down 73% from the all-time high and is only 22% above the IPO price in 2014.
Since its IPO, Alibaba has seen its active customers in China grow by 2.7x (to 930m), revenue by 11.3x (to $130b) and profits by 4.7x (to $24.3b).
5 reasons why I still like it
🧵👇
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I like Joel’s conviction in the three Tech giants: $GOOG, $MSFT and $AMZN (‘not fully priced, never seen businesses that good before, network effects and barriers to entry’).
Thank you William (
@williamgreen72
) for another great interview.
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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
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Rolex is acquiring Swiss luxury watch retailer Bucherer. The price is not disclosed. Bucherer operates more than 100 stores globally, 53 of which currently distribute Rolex watches.
Big move for Rolex to enter the retail operations.
A little worrying for $WOSG.L.
1/2
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Druckenmiller recommended the book by Edward Chancellor “The price of time“ which he called Tour de Force. One lesson from the book which studied all financial bubbles over the past 500 years is that they were all followed by the worst economic outcomes.
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Interesting $ABNB pitch by students at Pershing Square competition.
I never owned the stock and have my doubts, still worth flagging.
Alex has been following the stock in detail and may have a better view 😉
@TSOH_Investing
60-page presentation available at Empire Financial.
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Ray Dalio highlighhts five issues about China’s economy and makes his conclusion about investing there.
🧵👇
1 | “There are big debt and economic problems that are depressing economic activity, prices, and psychology.”
1/6
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US fiscal position is on unsustainable path. US is already spending almost 40% of all taxes on seniors. In 20 years this will rise to 60%.
2/15
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This quarterly newsletter by Columbia Business School students looks like a really good resource for stock investors. A few interesting stock pitches and many ideas about investment process to think about.
Some ideas I picked up from the latest edition 📝👇
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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.”
🧵👇
1/6
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Oakmark Funds run by Bill Nygren published their quarterly letter. The fund started 5 new positions and sold 5 others.
“Most of the eliminations were in companies that we invested last year when faster growing stocks sold-off sharply (Adobe, Uber, Take-Two, Netflix).”
1/19
🧵👇🏼
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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
🧵👇🏼
1/8
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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
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Germany was in great shape yesterday. But I was quite surprised by the amount of Chinese brands ads. In the past, it was usually Coke or McDonald's.
This time it was Aliexpress, BYD, Vivo, Hisense.
Ok there was also Lidl and Strauss, Booking…
I take it as a sign that some of
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“I am worried there are more “dead bodies” ahead, I just don’t know where they are. I knew them in ‘07-08. I don’t think SVB was the last one.”
/END
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Mohnish Pabrai makes a bear case on incumbent auto manufacturers.
And a Bullish case on car dealerships, which make most money in used cars, financing and spare parts/maintenance.
Pretty interesting and hard to disagree.
⤵️ $GM $F $STLA
🚀 $AN $AZO $LAD $ABG
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“Asset price inflation over the past two decades has created about $160 trillion in “paper wealth.” Economic growth was sluggish, inequality rose, and every $1.00 in investment generated $1.90 in debt.”
McKinsey outlines 4 market scenarios until 2030.
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Semper Augustus annual letter is out. 149 pages of financial history, stories about Charlie Munger, analysis of Berkshire Hathaway, current market conditions and expected returns.
All you can wish for to make it a fun weekend!
Enjoy 😉
$BRK
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“You have to have humility. If someone ever asked me what made me so successful, my first answer would be having an open mind. I had positions where I was sure I would hold them for 2 years and a week later I was short. Because conditions changed. And if conditions change, you
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James Grant from the Interest Rate Observer on what he has learnt after publishing his journal for 40 years:
"What I've learned is not to be so sure. There is no tuition higher in the field of education than the tuition you pay in investing, for holding too tight to an opinion
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This is a good chart on $BABA, even considering the VIE structure, geopolitics and other issues.
➡️Since 2015, EPS is up 3.7x
➡️The share price is flat!
👇🏽
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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
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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
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“I am not as good an investor as I was in my 30s and 40s years ago. I can predict better I don’t pull the trigger the way when I was young. I only hire people in their 20s. Once you have the scars I have, it wears on you.”
8/15
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He concludes: “It is time that we let go of the false pretense that cutting entitlements is a choice. It is not. Either we cut them today or we will have to cut them much more tomorrow.”
5/15
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Fantastic conversation with the CEO of Norges, Nicolai Tangen, the world's largest sovereign wealth fund hosted by prof. Tano Santos and legendary
@mjmauboussin
.
I liked the idea of 'negative selection' and 'subtracting value through trading',
Full notes🧵👇🏽
1/22
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Buffett once wrote about Jamie Dimon's letters: "I recommend that you read his annual letter."
In the latest letter, Dimon seems to be quite cautious, although this is to be expected from the CEO of one of the largest financial groups.
Here are some interesting points 🧵👇🏽
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Charlie Munger spoke again, this time to
@WSJ
. Here are his most interesting comments.
1 | What he would do differently as an investor if he started today?
🧵👇🏼
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Some common themes from the London Value Investor Conference which I attended last week 📝👇
1 | Most participants agreed we were in a new era of permanently high inflation and interest rates. This is a huge change compared to the past 40 years.
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During the last decade, US debt grew from $15T to $31T today, a level only comparable to that after WWII.
“But what is worse is that this debt does not account for what the government has promised it will pay you in terms of social security and Medicare.”
3/15
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A great piece by
@mjmauboussin
on the drivers behind increasing returns on capital reviewing key ideas from studies on economic growth, competition and innovation.
One idea I particularly liked is that "superstar" firms (with much higher margins than rivals) substantially
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Q: “Is it harder to invest today than before?”
A: “Yes, because I have never seen a roadmap for the current situation. I have never seen this movie before.”
“I read that 7 stocks are responsible for 85% of the S&P rise this year. It reminds me very much of Nifty Nifty era.”
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Seth Klarman (CEO of the Baupost Group), one of the most successful investors and the author of the most expensive book on value investing, spoke to James Grant.
H/t
@jtkoster
Here is the link to the podcast 👇🏼
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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
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Gabelli YouTube channel is a pretty good source of ideas, worth checking it out occasionally.
Three ideas I picked up there:
1⃣ Dreams Intl ($1126.HK)
✅Strong balance sheet - Net cash of HK$1.3B
✅1.6x EBITDA ('24e) and around 4x P/E
✅40% div payout, current yield is >
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The fiscal gap is how much taxes need to be raised to maintain the current magnitude of safety nets in the future. Today that measure is 7.7% of GDP. This is equivalent to a 40% increase in all Federal taxes collected, or, a cut of 35% in federal spending.
4/15
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This could be a great case study. One of the leading innovator with high R&D spending, now facing problems and continuous decline. Probably will be a while before the turnaround efforts pay off.
$MMM
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My two favourite quotes on dealing with falling stock prices from Druckenmiller and Buffett.
I think it’s important to remember them in the current environment.
I like them so much that I will print them out and put it on my wall.
🧵👇🏼
1/3
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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
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An account of internal mess at $BABA by
@FT
who “spoke to nine Alibaba employees, who painted a picture of a flailing enterprise trying to chart a new course after canning crucial planks of an ambitious restructuring plan that was supposed to revive its fortunes.”
🧵👇🏼
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On his investment process
I am waiting for the fat pitch and constantly reevaluate my process. The good thing about playing big is you don’t get lazy. I just want to stay alive financially until the chaos comes, because it’s coming. I don’t see the fat pitches currently.
7/15
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His current positioning: short USD, long Gold, Euro, Oil, AUD.
13/15
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Not positive on China: “A lot of its growth was “semi-capitalist”, but Xi proved himself to be “Maoist”. “There is room for only one monopoly in China - him.”
10/15
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Here is my latest thesis on $VAR.NO
15% dividend yield and 100% production growth in two years. What’s the catch?
1/6
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What a contrast with founder-led startups, starting in a garage:
The new CEO of $SBUX “will be able to live in his home in Southern California and can commute to Starbucks’s head office on a corporate jet.”
“To woo its new CEO, Starbucks offered a $10 million cash signing bonus
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Thinks Generative AI has the potential to be as transformative and even bigger than the Internet. This is going to create change and change leads to stock price changes.
Long $NVDA, $MSFT as AI beneficiaries. Doing more work to understand the future winners.
12/15
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An interesting study by McKinsey on the drivers of outperformance of family-owned businesses (FOBs) based on financial analysis and numerous interviews.
They identified critical mindsets with 5 strategic actions deployed by the outperformers.
🧵👇🏽
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The first book Todd Combs gave to Warren and Charlie when he joined $BRK - Ubiquity.
Highlights non-linear relations, helps to understand asymmetric risks.
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One of the most interesting companies I have come across over the past few months: Biglari Holdings $BH.
Founded by an entrepreneur Sardar Biglari (66% economic interest).
Mkt Cap: $636mn
EV: $146mn
1/4
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Just finished going through my notes from the London Value Investor Conference. Here are some of my takeaways:
1 | The two recurring themes were structurally higher inflation and rising commodity prices (quite unusual for a value conference).
1/9
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A good overview of the recent turnaround at $GE by
@TheEconomist
. The stock has tripled in 5 years. Surprised Buffett has not taken a stake.
🧵👇🏽
1⃣ "Mr Culp, the first outsider to run GE, inherited a mess. GE ended 2018 with a $23bn write-down of its power business (largely
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Here are the priorities set by the Chairman, CEO and CFO of $BABA at their earnings call:
🧵👇🏽
Capital allocation priorities (Joe Tsai, Chairman):
1/9
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An interesting view on the Japanese stock market from Baillie Gifford:
1 | "It may surprise some to know that over the past three decades, TOPIX earnings growth has far exceeded that of the US’s S&P 500 before adjusting for inflation. In real terms, it’s more than double."
1/8
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A thought-provoking piece by
@HorizonKinetics
on the risks faced by US markets, passive investing and some top ideas:
🧵👇🏼
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
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A great post by
@JohnHuber72
on the rising capital intensity of the Big Tech and the implications for earnings quality and future returns.
1/ Capex [of Big 4 Tech companies] is now over 3 times depreciation expense.
2/ This spending hasn’t yet hit the income statement, but it
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My notes on Howard Marks conversation with Nicolai Tangen.
🧵👇🏽
➡️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
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A long read on
#LVMH
by Bloomberg.
🧵👇🏼
✅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
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This looks like a true hidden value gem! Lion Rock - one of the largest book printers in the world, led by the founder and largest shareholder, CK Lau.
40% of the market cap is net cash, the stock trades at 6x P/E and 31% FCF yield, 8.5% div yield.
@MikeFritzell
met the founder
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Einhorn opened 31 new positions last quarter, struggle to find at least one at 5x PE that is buying back 20% of its stock.
Feels like he gave this interview a couple of years ago…
The latest interview of David Einhorn is worth a listen.
Apart from a few headline-grabbing statements (‘Markets are broken’), the interview made me think about his changed investment approach.
I am wondering whether instead of buying 5x PE stocks today, he is actually making
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"Discovering the unsung superstars of Japanese technology" by Baillie Gifford:
✅"These companies are unfettered by complex industrial crossholdings. They marry commercial opportunism and vision with Japanese values of loyalty and a jobs-for-life culture."
1/6
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A very interesting strategy - buying stocks that were excluded from the index.
🧵👇🏼
➡️
@RA_Insights
have unveiled “a stock index named NIXT that would have earned investors about 74 times their money since 1991 by buying stocks kicked out of indexes.”
h/t
@Spencerjakab
1/4
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Look for companies with low share-based compensation (as percentage of sales), buyback helps too.
Interesting findings by
@mjmauboussin
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Another piece on the extremely weak performance of spirits companies: trading at 10+ year lows, down 20-40% in 12 monhts.
Quality companies (high margins, ROIC, strong brands, limited supply) but facing structural headwinds (younger people drink less alcohol).
$DEO
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The most interesting points I picked up from the Seth Klarman interview with Jim Grant 🧵👇🏼
1 | “The idea of Margin of Safety comes from the inherent risk aversion which is part of a value philosophy. It means there is room to get some small things wrong,…
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I have prepared a list of Top 50 Fund Managers Letters -a great source for inspiration if you are looking for a new investment idea or a fresh take on the sector.
You can download it from my website if you subscribe there.
Hope you enjoy it 🙌🏽
#investing
#InvestmentWisdom
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The mitigating factor is the mutual self-destruction. Zi knows that if he takes Taiwan, will take every semiconductor fab that TSMC has in 30 minutes.
Thinks China will not invade Taiwan in the next 3-5 years, but if economy weakens, chances will be higher.
11/15
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I think $NKE is one of those investment opportunities today. Not cheap in absolute terms (22x PE), but this is on a cyclically low earnings and it is below historical avg PE of 25.
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Munger spoke to
@FT
ahead of the $BRK weekend. Some interesting comments below 📝👇
1 | “It’s not nearly as bad as it was in 2008. But trouble happens to banking just like trouble happens everywhere else.”
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JPM publishes good slide decks every quarter. I found these two charts a little puzzling. Basically, your returns are better when you buy at all-time highs...at least during 1988-2023.
Unless I misunderstood this...? 🤔
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Sharing my latest top 5 stock ideas that I publish monthly.
1/ Horiba (6856 JP) - a Japanese family business and a global leader in measurement equipment, famous for uncovering VW diesel scandal. Double-digit revenue growth, trading at 7.7x PE, net cash.
🧵👇🏼
1/7
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“If your stock goes down 10% and that upsets you, it obviously means you think the market knows more about the company than you do. And, in that case, you’re the patsy.
If it goes down 10% and you want to buy more because you know the business is worth just as much as when you
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Japan is the best performing market YTD, buybacks on the rise.
I think the next big discovery could be Korea: still classified as EM, 13th largest economy, home to many global brands. Cheap as EM. There are talks of market reforms and liberalising access for international retail
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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
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Good to see other investors noticing value in $BABA
From O'Keefe Stevens Q2 letter:
"It's rare to find a dominant market share business with significant tailwinds trading for ~10x adj EPS. After accounting for their ~$60B net cash balance sheet, the stock is trading at 6-7x,
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A long story in
@WSJ
on Gucci's strategy to move into a more classic ultra luxury segment. Tempted to give it a chance via $KER.PA, but I also realise it will be a long-term game, and more importantly it can fail (you cannot become Hermes even in a few years).
🧵👇🏼
1/14
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Ok, this is a big statement by
@FT
claiming Weshler and Combs trailed S&P and Buffett himself.
Long read
🧵👇🏽
1⃣"In their early years at Berkshire, Combs and Weschler racked up some spectacular gains that allowed Buffett to praise them for leaving him “in the dust”.
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Plenty of interesting ideas at this year’s London Value Investor conference. Will be sharing my notes later.
So far just a great comment by David Einhorn when asked about when to sell a long position.
1/3
👇
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$BABA cutting cloud prices by 20%. This is the second cut in a year (the first one was 50%). I guess we can forget about Cloud profitability for a while now.
Apparently, Alibaba is still the market leader in China cloud, followed by Huawei and Tencent.
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Terry Smith is brilliant at distilling complex financial terms into plain English (and so is his performance +15.% since inception in GBP terms).
Here is the part I enjoyed the most in his latest Annual letter:
✅“Equities benefit trom a feature which no other asset class,
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“I’m not as engaged as I used to be, though I do have an opinion and the opinions are the opinion of a long-term investor. I think the market is over-valued, but the market is extremely bifurcated. You have the first quartile of the S&P trading at 35x earnings, not my territory…
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"Copper is a pretty simple story, takes about 12 years, greenfield to produce copper, and you got EVs, the grid, data centers, and believe it or not munitions. We just think the supply-demand situation is incredible for the next five or six years."
5/6
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A new memo by
@HowardMarksBook
. Key takeways
🧵👇🏽
✅"Because the future is inherently uncertain, we usually have to choose between (a) avoiding risk and having little or no return, (b) taking a modest risk and settling for a commensurately modest return, or (c) taking on a high
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Did some more work to see what is priced in into $BABA stock. Very roughly, I think the market assigns 40-50% chance for the Worst Case, which looks too pessimistic.
I am down 50% in this position, so I looked into the lessons to be learnt.
I share all this in my latest post 👇
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"If we were all sitting here in 1999 talking about the Internet, I don’t think anybody would have estimated it would be as big as it got in 20 years. And yet, if you bought the Nasdaq in ’99, it went down 80% before that all came to fruition. That’s not going to happen with AI.
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Mohnish Pabrai was the star in the London Value community today.
Great evening, quite a few things to think about!
The sad thing - he doesn’t own a single UK stock, but Mohnish is open for new ideas.
Not sure where to start, everything is super cheap here, although not as
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$BABA +5% in HK today on plans to start charging a basic software service fee of 0.6% on confirmed transactions for vendors on both the Tmall and Taobao.
The company earns the majority of its Taobao and Tmall revenue through customer management fees, which merchants pay to
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How many compounders does Buffett hold today?
I decided to look at the past 10yr earnings growth of $BRK top 11 holdings (9th position is merger arb). I also checked their current P/E.
You would be amazed to learn the results of this little exercise.
Here they are 🧵👇🏼
1/5
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Came across shareholder letters written by former Buffett’s assistant, Tracy Cool who launched her own investment fund, Kanbrick.
Here is the list of books she recommended over the past two years 📖👇
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$BABA results look weak operationally, with continued slow sales growth and weak margins.
On the positive side:
✅International sales grew strongly (+46%)
✅Cloud EBITA +86% YoY (margin higher at 8.4% vs 4.6% a year ago)
✅Cash at a staggering $92B as of 31 Dec '23 (46% of
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