⁠Stock Analysis Compilation
Protean funds on Getinge $GETIB SS

Thesis: Getinge’s ECMO franchise concerns may be overblown, making it an attractive play as quality improvements and potential M&A set the stage for a turnaround

(Extract from their Q3 letter) https://t.co/8kxLLlZcS9
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⁠Stock Analysis Compilation
Rockwood Strategic on Facilities by ADF $ADF LN

Thesis: Facilities by ADF, with high barriers to entry and growth from TV/Film demand, offers attractive margins and strategic acquisition potential, making it a promising investment for the future

(Extract from their Q3 letter) https://t.co/TqozLuQxWb
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⁠Startup Archive
Keith Rabois tells the story of Elon Musk observing interns waiting in line for coffee at SpaceX

Keith is asked how Elon Musk gets so much done, to which he replies:

“If you approach every day and every week of your life with the question, ‘What did you accomplish this week?’ I think that compounds, and very few people do that. I think that’s the number one ingredient.”

As for the second ingredient, Keith tells a story he heard from some friends at SpaceX where Elon observed a line of interns piling up around the coffee machine. This prompted Elon to send a memo to the company asking:

“Why are all the interns wasting all this time? If you feel like you have nothing better to do than waiting in line, you’re at the wrong company. And by the way, I’m installing cameras to make sure that we don’t have lines at the coffee shop.”

Keith believes that stamping out entitlement and expecting people to accomplish things every day also compounds over decades in Elon’s career. He recalls a principle PayPal cofounder Max Levchin taught him where he compares startups to gas in chemistry:

“Gas expands to the size of the container… If you tell people they have a month, it’ll take a month. If you tell people it takes two weeks, it’ll take two weeks. Tell them a week, it’ll take a week. So you want to constantly compress the container size because those accomplishments add up over months, quarters, years, and decades.”

Video source: @imchrisvasquez (2024)
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⁠iinvested
3Q'24 Cooper Investors Global Equity Fund (Unhedged) on $TKO

More fund letters here:
https://t.co/ccjFhSPQ2v https://t.co/k7I1RLw0hu
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⁠Startup Archive
RT @ChetanChawla: “Gas expands to the size of the container… If you tell people they have a month, it’ll take a month. If you tell people it takes two weeks, it’ll take two weeks. Tell them a week, it’ll take a week. So you want to constantly compress the container size because those accomplishments add up over months, quarters, years, and decades.”

@rabois on Parkinson’s Principle

#Startup #FounderMode

Keith Rabois tells the story of Elon Musk observing interns waiting in line for coffee at SpaceX

Keith is asked how Elon Musk gets so much done, to which he replies:

“If you approach every day and every week of your life with the question, ‘What did you accomplish this week?’ I think that compounds, and very few people do that. I think that’s the number one ingredient.”

As for the second ingredient, Keith tells a story he heard from some friends at SpaceX where Elon observed a line of interns piling up around the coffee machine. This prompted Elon to send a memo to the company asking:

“Why are all the interns wasting all this time? If you feel like you have nothing better to do than waiting in line, you’re at the wrong company. And by the way, I’m installing cameras to make sure that we don’t have lines at the coffee shop.”

Keith believes that stamping out entitlement and expecting people to accomplish things every day also compounds over decades in Elon’s career. He recalls a principle PayPal cofounder Max Levchin taught him where he compares startups to gas in chemistry:

“Gas expands to the size of the container… If you tell people they have a month, it’ll take a month. If you tell people it takes two weeks, it’ll take two weeks. Tell them a week, it’ll take a week. So you want to constantly compress the container size because those accomplishments add up over months, quarters, years, and decades.”

Video source: @imchrisvasquez (2024) - Startup Archive
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⁠Startup Archive
RT @mikemcg0: Interesting idea @rabois learned from @mlevchin comparing startups to gas:

"Gas expands to the size of the container… If you tell people they have a month, it’ll take a month. If you tell people it takes two weeks, it’ll take two weeks... So you want to constantly compress the container size because those accomplishments add up over months, quarters, years, and decades."

Keith Rabois tells the story of Elon Musk observing interns waiting in line for coffee at SpaceX

Keith is asked how Elon Musk gets so much done, to which he replies:

“If you approach every day and every week of your life with the question, ‘What did you accomplish this week?’ I think that compounds, and very few people do that. I think that’s the number one ingredient.”

As for the second ingredient, Keith tells a story he heard from some friends at SpaceX where Elon observed a line of interns piling up around the coffee machine. This prompted Elon to send a memo to the company asking:

“Why are all the interns wasting all this time? If you feel like you have nothing better to do than waiting in line, you’re at the wrong company. And by the way, I’m installing cameras to make sure that we don’t have lines at the coffee shop.”

Keith believes that stamping out entitlement and expecting people to accomplish things every day also compounds over decades in Elon’s career. He recalls a principle PayPal cofounder Max Levchin taught him where he compares startups to gas in chemistry:

“Gas expands to the size of the container… If you tell people they have a month, it’ll take a month. If you tell people it takes two weeks, it’ll take two weeks. Tell them a week, it’ll take a week. So you want to constantly compress the container size because those accomplishments add up over months, quarters, years, and decades.”

Video source: @imchrisvasquez (2024) - Startup Archive
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⁠Dimitry Nakhla | Babylon Capital®
A sober valuation analysis on $LRCX 🧘🏽‍♂️

•NTM P/E Ratio: 20.35x
•10-Year Mean: 19.80x

•NTM FCF Yield: 4.72%
•10-Year Mean: 5.57%

As you can see, $LRCX appears to be trading somewhere near fair value & over fair value

Going forward, investors can receive ~3% LESS in earnings per share & ~15% LESS in FCF per share 🧠***

Before we get into valuation, let’s take a look at why $LRCX is a good business

BALANCE SHEET✅
•Cash & Short-Term Inv: $5.84B
•Long-Term Debt: $4.46B

$LRCX has a strong balance sheet, an A- S&P Credit Rating & 25x FFO Interest Coverage

RETURN ON CAPITAL✅
•2020: 24.0%
•2021: 40.0%
•2022: 46.8%
•2023: 39.3%
•2024: 31.3%

RETURN ON EQUITY✅
•2020: 45.7%
•2021: 69.8%
•2022: 74.8%
•2023: 62.3%
•2024: 45.7%

$LRCX has strong return metrics, highlighting the financial efficiency of the business

REVENUES✅
•2014: $4.61B
•2024: $14.91B
•CAGR: 12.45%

FREE CASH FLOW✅
•2014: $571.55M
•2024: $4.25B
•CAGR: 22.23%

NORMALIZED EPS✅
•2014: $0.44
•2024: $3.03
•CAGR: 21.28%

PAID DIVIDENDS✅
•2019: $0.44
•2024: $0.80
•CAGR: 12.70%

SHARE BUYBACKS✅
•2014 Shares Outstanding: 1.74B
•LTM Shares Outstanding: 1.32B

By reducing its shares outstanding ~24%, $LRCX increased its EPS by ~31% (assuming 0 growth)

MARGINS✅
•LTM Gross Margins: 47.6%
•LTM Operating Margins: 29.0%
•LTM Net Income Margins: 25.7%

***NOW TO VALUATION 🧠

As stated above, investors can expect to receive ~3% LESS in EPS & ~15% LESS in FCF per share

Using Benjamin Graham’s 2G rule of thumb, $LRCX has to grow earnings at a 10.18% CAGR over the next several years to justify its valuation

Today, analysts anticipate 2025 - 2027 EPS growth over the next few years to be more than the (10.18%) required growth rate:

2025E: $3.58 (18.1% YoY) *FY Jun
2026E: $4.40 (23.0% YoY)
2027E: $4.97 (12.8% YoY)

$LRCX has a decent track record of meeting analyst estimates ~2 years out, but let’s assume $LRCX ends 2027 with $4.97 in EPS & see its CAGR potential assuming different multiples:

22x P/E: $109.34💵 … ~17.5% CAGR

21x P/E: $104.37💵 … ~15.4% CAGR

20x P/E: $99.40💵 … ~13.4% CAGR

19x P/E: $94.43💵 … ~11.3% CAGR

18x P/E: $89.46💵 … ~9.2% CAGR

While it’s certainly reasonable for $LRCX to trade for 21x - 22x, I wouldn’t want to rely on that assumption as it doesn’t leave us with a substantial margin of safety

Yet, $LRCX still appears to have attractive return potential if we assume 19x - 20x, a multiple that’s arguably justified by its excellent capital allocation & wide moat

Moreover, $LRCX derives a large portion of its revenues from memory chip production, which is a strong growth driver for the company

Today at $72.84💵 $LRCX appears to be a decent consideration, albeit with little margin of safety

Given its high uncertainty (with little margin of safety), I’d get more interested in $LRCX closer to $63💵 (9.3% below today’s price) where I can reasonably expect 12.76% CAGR while assuming 17x earnings

#stocks #investing
___

𝐃𝐈𝐒𝐂𝐋𝐎𝐒𝐔𝐑𝐄‼️: 𝐓𝐡𝐢𝐬 𝐢𝐬 𝐍𝐎𝐓 𝐈𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐀𝐝𝐯𝐢𝐜𝐞. 𝐁𝐚𝐛𝐲𝐥𝐨𝐧 𝐂𝐚𝐩𝐢𝐭𝐚𝐥® 𝐚𝐧𝐝 𝐢𝐭𝐬 𝐫𝐞𝐩𝐫𝐞𝐬𝐞𝐧𝐭𝐚𝐭𝐢𝐯𝐞𝐬 𝐦𝐚𝐲 𝐡𝐚𝐯𝐞 𝐩𝐨𝐬𝐢𝐭𝐢𝐨𝐧𝐬 𝐢𝐧 𝐭𝐡𝐞 𝐬𝐞𝐜𝐮𝐫𝐢𝐭𝐢𝐞𝐬 𝐝𝐢𝐬𝐜𝐮𝐬𝐬𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭.

𝐓𝐡𝐞 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐜𝐨𝐧𝐭𝐚𝐢𝐧𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭 𝐢𝐬 𝐢𝐧𝐭𝐞𝐧𝐝𝐞𝐝 𝐟𝐨𝐫 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧𝐚𝐥 𝐩𝐮𝐫𝐩𝐨𝐬𝐞𝐬 𝐨𝐧𝐥𝐲 𝐚𝐧𝐝 𝐬𝐡𝐨𝐮𝐥𝐝 𝐧𝐨𝐭 𝐛𝐞 𝐜𝐨𝐧𝐬𝐭𝐫𝐮𝐞𝐝 𝐚𝐬 𝐢𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐚𝐝𝐯𝐢𝐜𝐞 𝐭𝐨 𝐦𝐞𝐞𝐭 𝐭𝐡𝐞 𝐬𝐩𝐞𝐜𝐢𝐟𝐢𝐜 𝐧𝐞𝐞𝐝𝐬 𝐨𝐟 𝐚𝐧𝐲 𝐢𝐧𝐝𝐢𝐯𝐢𝐝𝐮𝐚𝐥 𝐨𝐫 𝐬𝐢𝐭𝐮𝐚𝐭𝐢𝐨𝐧. 𝐏𝐚𝐬𝐭 𝐩𝐞𝐫𝐟𝐨𝐫𝐦𝐚𝐧𝐜𝐞 𝐢𝐬 𝐧𝐨 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞 𝐨𝐟 𝐟𝐮𝐭𝐮𝐫𝐞 𝐫𝐞𝐬𝐮𝐥𝐭𝐬.

𝐈𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐜𝐨𝐧𝐭𝐚𝐢𝐧𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭 𝐡𝐚𝐬 𝐛𝐞𝐞𝐧 𝐨𝐛𝐭𝐚𝐢𝐧𝐞𝐝 𝐟𝐫𝐨𝐦 𝐬𝐨𝐮𝐫𝐜𝐞𝐬 𝐛𝐞𝐥𝐢𝐞𝐯𝐞𝐝 𝐭𝐨 𝐛𝐞 𝐫𝐞𝐥𝐢𝐚𝐛𝐥𝐞, 𝐛𝐮𝐭 𝐢𝐬 𝐧𝐨𝐭 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞𝐝 𝐚𝐬 𝐭𝐨 𝐜𝐨𝐦𝐩𝐥𝐞𝐭𝐞𝐧𝐞𝐬𝐬 𝐨𝐫 𝐚𝐜𝐜𝐮𝐫𝐚𝐜𝐲.
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