⁠Finding Compounders
This is the best clip I’ve watched this year

“I don’t need to change the world overnight , I am gonna change the world over the next 50 years” - Jensen Huang, NVIDIA CEO https://t.co/PtH93Ffoye
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⁠Stock Analysis Compilation
Artisan US Mid Cap Growth Strategy on US Foods $USFD US

Thesis: US Foods is poised for continued margin growth and enhanced profitability through operational improvements and strategic initiatives in the competitive food distribution industry.

(Extract from their Q4 letter) https://t.co/QGVKcFplWM
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AkhenOsiris
Translation: Market was balls deep long Bessent, but it was a Scamath SPAC 😱

Politico:

Bessent’s muted reassurances to financial markets shows there may be no one in the administration willing to stand in the way of Trump’s emboldened mandate for reshaping U.S. economic policy. Stock market convulsions, along with the advice of conventional economic policymakers like Trump’s first Treasury secretary, Steven Mnuchin, helped temper the president’s protectionist and potentially calamitous priorities during his previous stint in the White House.

Now, “whatever the guard rails that were in place the first administration no longer exist,” said one former Trump administration official, who was granted anonymity to speak candidly.

Wall Street’s initial favorable reaction to Bessent, a George Soros protégé who had little track record in Republican politics before joining Trump’s circle, may have misread his fervor for the president’s agenda.
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⁠The All-In Podcast
🚨 Andrew Schulz and Chamath Discuss the Main Street vs Wall Street Disconnect

@andrewschulz:

"Every American thinks they're going to be a millionaire. That's what this country drives off of."

"And the second they stop thinking they will be, or they can be, it falls apart."

"I'm telling you, the you guys of the world need to pay close attention to because there's going to be no empathy if anything bad happens, 'Oh the stock market is down.'"

"No Americans are invested in the stock market. That's all you guys."

@Jason:

" Half of the country is."

@chamath:

" I've been saying it for months. Nobody cares about the stock market. Nor should we."

"And the reason is because we, people who own these assets, have overly benefited more than we've deserved for the last 15 years."

"We took interest rates literally to zero. Anybody like us who could have gone and gotten levered up and gone into the stock market was richly rewarded."

"And the problem is we left everybody else behind."

"And I think the great thing about Trump is he is going to reset that he is going to take a lot of wealth away from asset holders.

"There is no sympathy.  I think it's fantastic."

@andrewschulz:

" It's great to hear you even saying that, because I feel like a lot of people that are in your guy's position don't understand that disconnect."
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⁠Finding Compounders
Nick Sleep on the Robustness Ratio.

This ratio is appropriate when analyzing low cost service providers such as GEICO, Costco and Amazon.

This is from my newsletter.
The link is in my bio https://t.co/JOxdiAI5SX
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⁠The Kobeissi Letter
US wage growth is set to cool this year:

The share of private workers voluntarily quitting their jobs fell to 2.1% in November, the lowest since the 2020 pandemic.

The quits rate has declined by 1.2 percentage points over the last 3 years, matching the decline seen during the 2008 Financial Crisis.

In the past, the quits rate has been a leading indicator for the Employment Cost Index measuring employee compensation changes.

This suggests wages and benefits growth in the US may decline from the current 3.8% YoY to as low as 3.0% YoY over the next 6-9 months.

This could also lower inflationary pressures in the second half of the year.

Wage growth seems to be normalizing.
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⁠Stock Analysis Compilation
Artisan US Mid Cap Growth Strategy on Pure Storage $PSTG US

Thesis: Pure Storage is redefining enterprise data storage by utilizing custom all-flash systems sourced from raw NAND flash memory, which positions the company for accelerated growth following its recent hyperscaler data center contract.

(Extract from their Q4 letter)
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⁠Dimitry Nakhla | Babylon Capital®
RT @DimitryNakhla: $BKNG stock finally reached my $4,300 price target & bounced +4% 💸

While this is nice in the short-term, I’d much prefer $BKNG to trade in my accumulation range a bit longer so I can continue adding to the position

As I stated a couple months ago:

“I’d consider $BKNG a great purchase closer to $4300 (~18.50x multiple) roughly 7% below today’s share price or closer to 21x NTM estimates

This is where I can reasonably expect ~10.50% CAGR assuming a more conservative 20x 2027 earnings estimates, ensuring a substantial margin of safety & leaving room for potential multiple expansion”

A quality valuation analysis on $BKNG 🧘🏽‍♂️

•NTM P/E Ratio: 22.76x
•3-Year Mean: 20.52x

•NTM FCF Yield: 5.35%
•3-Year Mean: 5.17%

As you can see, $BKNG appears to be trading near fair value

Going forward, investors can receive ~10% LESS in earnings per share & ~3% MORE in FCF per share 🧠***

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

BALANCE SHEET✅
•Cash & Short-Term Inv: $15.78B
•Long-Term Debt: $13.79B

$BKNG has a great balance sheet, an A- S&P Credit Rating, & 9x FFO Interest Coverage Ratio

RETURN ON CAPITAL✅
•2019: 33.3%
•2020: 2.7%
•2021: 14.2%
•2022: 29.1%
•2023: 47.3%
•LTM: 48.8%

$BKNG has strong ROIC, highlighting the financial efficiency of the business

REVENUES✅
•2014: $8.44B
•2024E: $23.43B
•CAGR: 10.74%

FREE CASH FLOW✅
•2014: $2.78B
•2024: $7.52B
•CAGR: 10.46%

NORMALIZED EPS✅
•2014: $53.31
•2024E: $182.76
•CAGR: 13.11%

SHARE BUYBACKS✅
•2014 Shares Outstanding: 53.02M
•LTM Shares Outstanding: 34.51M

By reducing its shares outstanding 35%, $BKNG increased its EPS by 54% (assuming 0 growth)

MARGINS✅
•LTM Gross Margins: 84.7%
•LTM Operating Margins: 28.7%
•LTM Net Income Margins: 21.8%

***NOW TO VALUATION 🧠

As stated above, investors can expect to receive ~10% LESS in EPS & ~3% MORE in FCF per share

Using Benjamin Graham’s 2G rule of thumb, $BKNG has to grow earnings at an 11.38% 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 (11.38%) required growth rate:

2024E: $182.76 (20.1% YoY) *FY Dec

2025E: $208.88 (14.3% YoY)
2026E: $241.36 (15.6% YoY)
2027E: $282.17 (16.9% YoY)

$BKNG has a decent track record of meeting analyst estimates ~2 years out, but let’s assume $BKNG ends 2027 with $238.17 in EPS & see its CAGR potential assuming different multiples

23x P/E: $6489💵 … ~13.0% CAGR

22x P/E: $6207💵 … ~11.3% CAGR

21x P/E: $5925💵 … ~9.6% CAGR

20x P/E: $5643💵 … ~7.8% CAGR

19x P/E: $5361💵 … ~6.0% CAGR

As you can see, $BKNG appears to have attractive return potential if we assume >22x earnings, a valuation above allowing for slight multiple compression, yet one that’s below its 3-year mean

Additionally, $BKNG EPS growth rate ( >12%) more than justifies a >22x multiple

Today at $4620💵 $BKNG appears to be a decent consideration for investment & fairly valued

I’d consider $BKNG a great purchase closer to $4300 (~18.50x multiple) roughly 7% below today’s share price or closer to 21x NTM estimates

This is where I can reasonably expect ~10.50% CAGR assuming a more conservative 20x 2027 earnings estimates, ensuring a substantial margin of safety & leaving room for potential multiple expansion

#stocks #investing
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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 𝐢�[...]

� 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. - Dimitry Nakhla | Babylon Capital® tweet