Ahmad Jivraj
1/8
The Investor's Drawdown
Inspired by “The Struggle” by @bhorowitz
Every investor starts with a vision of success.
You will study the markets diligently and build a diversified portfolio.
You will make smart, calculated decisions based on thorough research.
Your strategy will be sound, and your patience infinite.
It's going to be absolutely perfect.
Then, the market turns against you.
tweet
1/8
The Investor's Drawdown
Inspired by “The Struggle” by @bhorowitz
Every investor starts with a vision of success.
You will study the markets diligently and build a diversified portfolio.
You will make smart, calculated decisions based on thorough research.
Your strategy will be sound, and your patience infinite.
It's going to be absolutely perfect.
Then, the market turns against you.
tweet
Offshore
Photo
Stock Analysis Compilation
Deep Sail Capital on Cellebrite $CLBT
Thesis: CLBT's robust growth trajectory and expanding margins set the stage for significant EBITDA outperformance, bolstered by a large untapped market for its solutions.
(Extract from their Q3 letter, link to the analysis in SAC#64) https://t.co/9HChoamJHE
tweet
Deep Sail Capital on Cellebrite $CLBT
Thesis: CLBT's robust growth trajectory and expanding margins set the stage for significant EBITDA outperformance, bolstered by a large untapped market for its solutions.
(Extract from their Q3 letter, link to the analysis in SAC#64) https://t.co/9HChoamJHE
tweet
Offshore
Photo
Dimitry Nakhla | Babylon Capital®
4 months ago I suggested $DHR was trading for a substantial premium at $240💵 & that I’d be more interested closer to $200💵
Since then, $DHR shares traded slightly down ~4% while the indexes have rallied ✅
As I stated in the analysis (post shared below):
“As you can see, $DHR needs to trade above 32x to have attractive return potential
While possible, I wouldn’t want to rely on that assumption as it doesn’t leave us with any margin of safety
While the 10-year mean multiple is 25.18x, I’d be content relying on somewhere closer to 27x - 28x earnings given $DHR quality, culture, competitive advantage, earnings growth rate & the quality of earnings, & long-term tailwinds in the sector
Yet, even at 27x - 28x earnings, the return potential outlook is bleak
Today at $240💵 $DHR is trading at a substantial premium
I’d become interested in $DHR closer to $200💵 or at ~25.50x NTM earnings (roughly 16.7% below today’s price)”
#stocks #investing"
A sober valuation analysis on $DHR 🧘🏽♂️
•NTM P/E Ratio: 30.69x
•10-Year Mean: 25.18x
•NTM FCF Yield: 4.34%
•10-Year Mean: 3.24%
As you can see, $DHR appears to be trading above fair value
Going forward, investors can receive ~18% LESS in earnings per share & ~25% LESS in FCF per share 🧠***
Before we get into valuation, let’s take a look at why $DHR is a quality business
BALANCE SHEET✅
•Cash & Short-Term Inv: $7.03B
•Long-Term Debt: $16.42B
$DHR has a great balance sheet, an A- S&P Credit Rating, & 22x FFO Interest Coverage
RETURN ON CAPITAL🆗*
•2019: 6.2%
•2020: 7.8%
•2021: 10.3%
•2022: 10.7%
•2023: 7.4%
•LTM: 7.2%
*ROIC relatively low partly due to $DHR growth strategy (acquisitions, capital allocation, etc)
RETURN ON EQUITY🆗
•2019: 8.3%
•2020: 10.8%
•2021: 12.8%
•2022: 13.3%
•2023: 8.2%
•LTM: 7.8%
$DHR has decent return metrics, highlighting the financial efficiency of the business
REVENUES✅
•2018: $17.05B
•2023: $23.89B
•CAGR: 6.97%
FREE CASH FLOW✅
•2018: $3.44B
•2023: $5.78B
•CAGR: 10.93%
NORMALIZED EPS✅
•2018: $7.58
•2023: $4.52
•CAGR: 10.89%
SHARE BUYBACKS❌
•2018 Shares Outstanding: 0.70B
•LTM Shares Outstanding: 0.74B
MARGINS✅
•LTM Gross Margins: 58.9%
•LTM Operating Margins: 21.9%
•LTM Net Income Margins: 17.1%
***NOW TO VALUATION 🧠
As stated above, investors can expect to receive ~18% LESS in EPS & ~25% LESS in FCF per share
Using Benjamin Graham’s 2G rule of thumb, $DHR has to grow earnings at a 15.35% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2024 - 2026 EPS growth over the next few years to be less than the (15.35%) required growth rate:
2024E: $7.62 (0.5% YoY) *FY Dec
2025E: $8.74 (14.8% YoY)
2026E: $9.71 (11.0% YoY)
$DHR has a decent track record of meeting analyst estimates ~2 years out, so let’s assume $DHR ends 2026 with $9.71 in EPS & see its CAGR potential assuming different multiples
32x P/E: $310.72💵 … ~11.3% CAGR
28x P/E: $271.88💵 … ~5.5% CAGR
27x P/E: $262.16💵 … ~4.0% CAGR
26x P/E: $252.46💵 … ~2.5% CAGR
25x P/E: $242.75💵 … ~1.0% CAGR
As you can see, $DHR needs to trade above 32x to have attractive return potential
While possible, I wouldn’t want to rely on that assumption as it doesn’t leave us with any margin of safety
While the 10-year mean multiple is 25.18x, I’d be content relying on somewhere closer to 27x - 28x earnings given $DHR quality, culture, competitive advantage, earnings growth rate & the quality of earnings, & long-term tailwinds in the sector
Yet, even at 27x - 28x earnings, the return potential outlook is bleak
Today at $240💵 $DHR is trading at a substantial premium
I’d become interested in $DHR closer to $200💵 or at ~25.50x NTM earnings (roughly 16.7% b[...]
4 months ago I suggested $DHR was trading for a substantial premium at $240💵 & that I’d be more interested closer to $200💵
Since then, $DHR shares traded slightly down ~4% while the indexes have rallied ✅
As I stated in the analysis (post shared below):
“As you can see, $DHR needs to trade above 32x to have attractive return potential
While possible, I wouldn’t want to rely on that assumption as it doesn’t leave us with any margin of safety
While the 10-year mean multiple is 25.18x, I’d be content relying on somewhere closer to 27x - 28x earnings given $DHR quality, culture, competitive advantage, earnings growth rate & the quality of earnings, & long-term tailwinds in the sector
Yet, even at 27x - 28x earnings, the return potential outlook is bleak
Today at $240💵 $DHR is trading at a substantial premium
I’d become interested in $DHR closer to $200💵 or at ~25.50x NTM earnings (roughly 16.7% below today’s price)”
#stocks #investing"
A sober valuation analysis on $DHR 🧘🏽♂️
•NTM P/E Ratio: 30.69x
•10-Year Mean: 25.18x
•NTM FCF Yield: 4.34%
•10-Year Mean: 3.24%
As you can see, $DHR appears to be trading above fair value
Going forward, investors can receive ~18% LESS in earnings per share & ~25% LESS in FCF per share 🧠***
Before we get into valuation, let’s take a look at why $DHR is a quality business
BALANCE SHEET✅
•Cash & Short-Term Inv: $7.03B
•Long-Term Debt: $16.42B
$DHR has a great balance sheet, an A- S&P Credit Rating, & 22x FFO Interest Coverage
RETURN ON CAPITAL🆗*
•2019: 6.2%
•2020: 7.8%
•2021: 10.3%
•2022: 10.7%
•2023: 7.4%
•LTM: 7.2%
*ROIC relatively low partly due to $DHR growth strategy (acquisitions, capital allocation, etc)
RETURN ON EQUITY🆗
•2019: 8.3%
•2020: 10.8%
•2021: 12.8%
•2022: 13.3%
•2023: 8.2%
•LTM: 7.8%
$DHR has decent return metrics, highlighting the financial efficiency of the business
REVENUES✅
•2018: $17.05B
•2023: $23.89B
•CAGR: 6.97%
FREE CASH FLOW✅
•2018: $3.44B
•2023: $5.78B
•CAGR: 10.93%
NORMALIZED EPS✅
•2018: $7.58
•2023: $4.52
•CAGR: 10.89%
SHARE BUYBACKS❌
•2018 Shares Outstanding: 0.70B
•LTM Shares Outstanding: 0.74B
MARGINS✅
•LTM Gross Margins: 58.9%
•LTM Operating Margins: 21.9%
•LTM Net Income Margins: 17.1%
***NOW TO VALUATION 🧠
As stated above, investors can expect to receive ~18% LESS in EPS & ~25% LESS in FCF per share
Using Benjamin Graham’s 2G rule of thumb, $DHR has to grow earnings at a 15.35% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2024 - 2026 EPS growth over the next few years to be less than the (15.35%) required growth rate:
2024E: $7.62 (0.5% YoY) *FY Dec
2025E: $8.74 (14.8% YoY)
2026E: $9.71 (11.0% YoY)
$DHR has a decent track record of meeting analyst estimates ~2 years out, so let’s assume $DHR ends 2026 with $9.71 in EPS & see its CAGR potential assuming different multiples
32x P/E: $310.72💵 … ~11.3% CAGR
28x P/E: $271.88💵 … ~5.5% CAGR
27x P/E: $262.16💵 … ~4.0% CAGR
26x P/E: $252.46💵 … ~2.5% CAGR
25x P/E: $242.75💵 … ~1.0% CAGR
As you can see, $DHR needs to trade above 32x to have attractive return potential
While possible, I wouldn’t want to rely on that assumption as it doesn’t leave us with any margin of safety
While the 10-year mean multiple is 25.18x, I’d be content relying on somewhere closer to 27x - 28x earnings given $DHR quality, culture, competitive advantage, earnings growth rate & the quality of earnings, & long-term tailwinds in the sector
Yet, even at 27x - 28x earnings, the return potential outlook is bleak
Today at $240💵 $DHR is trading at a substantial premium
I’d become interested in $DHR closer to $200💵 or at ~25.50x NTM earnings (roughly 16.7% b[...]
Offshore
Dimitry Nakhla | Babylon Capital® 4 months ago I suggested $DHR was trading for a substantial premium at $240💵 & that I’d be more interested closer to $200💵 Since then, $DHR shares traded slightly down ~4% while the indexes have rallied ✅ As I stated in…
elow today’s price)
At that price, I can reasonably expect ~12% CAGR while assuming 27x & ~10.2% CAGR while assuming 26x, a multiple I view as fair for $DHR
#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. "- Dimitry Nakhla | Babylon Capital®
tweet
At that price, I can reasonably expect ~12% CAGR while assuming 27x & ~10.2% CAGR while assuming 26x, a multiple I view as fair for $DHR
#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. "- Dimitry Nakhla | Babylon Capital®
tweet
Offshore
Photo
AkhenOsiris
RT @kouroshshafi: Amazon down despite Bezos done selling,
US Retail sales print positive for e-commerce (+9.4% vs +7.7% last month)
Alt data estimate full 4Q North America net sales could grow 10% to 11% Y/Y, trending above Visible
Alpha (VA) consensus (8% Y/Y)
tweet
RT @kouroshshafi: Amazon down despite Bezos done selling,
US Retail sales print positive for e-commerce (+9.4% vs +7.7% last month)
Alt data estimate full 4Q North America net sales could grow 10% to 11% Y/Y, trending above Visible
Alpha (VA) consensus (8% Y/Y)
13f highlights - Kouroshtweet
Offshore
Video
Startup Archive
RT @shrihacker: new definition of Diva:
expects a lot
drives hard
controversial
passionate
tweet
RT @shrihacker: new definition of Diva:
expects a lot
drives hard
controversial
passionate
Former Google CEO Eric Schmidt on why you should hire the divas: “Steve Jobs was a diva”
“If you read any management textbook, it says ‘don’t hire the divas’ because they’re nothing but a pain in the ass. And by the way, they are. But the people who are the divas—who believe—are the ones who will drive the culture and company to excellence. Steve Jobs was a diva. I worked with Bill Joy who was my colleague for many years—he’s an example of a diva. And I mean this in the most flattering way: they expect a lot, they drive people hard, they’re controversial, and they care passionately. If you find those people, you’re probably going to work for one so be nice to them.”
However, Eric does not mean that you should tolerate arrogant jerks at your company.
In his book How Google Works, he uses use the terms “divas” and “knaves” to distinguish between who you should tolerate and who you shouldn’t:
“Knavish behavior is a product of low integrity; diva-ish behavior is one of high exceptionalism. Knaves prioritize the individual over the team; divas think they are better than the team, but want success equally for both. Knaves need to be dealt with as quickly as possible. But as long as their contributions match their outlandish egos, divas should be tolerated and even protected. Great people are often unusual and difficult, and some of those quirks can be quite off-putting. Since culture is about social norms and divas refuse to be normal, cultural factors can conspire
to sweep out the divas along with the knaves. As long as people can figure out any way to work with the divas, and the divas’ achievements outweigh the collateral damage caused by their diva ways, you should fight for them. They will pay off your investment by doing interesting things.”
Video source: @GreylockVC (2015) tweet
Quiver Quantitative
RT @InsiderRadar: This week has been a busy one for insider trading, and while the S&P 500 is down 2.3% on the week, several insiders saw an early profit on their trades.
Here's a round-up on all of the $1M+ insider buys that we reported on this week:
$44M purchase of $SATS by Board Chairman on 11/14. Since our report, the stock has been flat.
$14.4M purchase by $OSCR CEO on 11/14. Since then the stock has risen 3%.
$6M purchase by $BH CEO on 11/14. Since then the stock has been flat.
$2.1M purchase by $SEDG Board Chairman on 11/13. Since then the stock has risen 3%.
$2M purchase by $ROK CFO on 11/12. Since then the stock has risen 3%.
$1.9M purchase by $SMLR director on 11/12. Since then the stock has fallen 10%.
$1M purchase by $EXAS CEO on 11/13. Since then the stock has risen 1%.
tweet
RT @InsiderRadar: This week has been a busy one for insider trading, and while the S&P 500 is down 2.3% on the week, several insiders saw an early profit on their trades.
Here's a round-up on all of the $1M+ insider buys that we reported on this week:
$44M purchase of $SATS by Board Chairman on 11/14. Since our report, the stock has been flat.
$14.4M purchase by $OSCR CEO on 11/14. Since then the stock has risen 3%.
$6M purchase by $BH CEO on 11/14. Since then the stock has been flat.
$2.1M purchase by $SEDG Board Chairman on 11/13. Since then the stock has risen 3%.
$2M purchase by $ROK CFO on 11/12. Since then the stock has risen 3%.
$1.9M purchase by $SMLR director on 11/12. Since then the stock has fallen 10%.
$1M purchase by $EXAS CEO on 11/13. Since then the stock has risen 1%.
tweet