Offshore
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Hidden Value Gems
A new position in David Poppe’s Giverny Capital - Medpace Holdings, providing clinical trial tests for small biotech companies. The founder owns 17%, stock at 25x PE.
$MEDP
The link to the full Q3 letter in reply. https://t.co/5ktdHceiDS
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A new position in David Poppe’s Giverny Capital - Medpace Holdings, providing clinical trial tests for small biotech companies. The founder owns 17%, stock at 25x PE.
$MEDP
The link to the full Q3 letter in reply. https://t.co/5ktdHceiDS
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Offshore
Video
Startup Archive
Elon Musk explains first principles thinking and uses it to predict 80%+ decline in battery prices
“First principles is a kind of physics way of looking at the world. And what that really means is you boil things down to the most fundamental truths and then reason up from there.”
People typically reason by analogy because it’s easier—we do something because that’s the way it has always been done or it’s what everyone else is doing.
First principles thinking requires a lot more energy, but it’s useful for inventing new things.
Elon gives battery prices as an example.
In this 2012 interview, he recounts how everyone told him: “battery packs are really expensive and that’s the way they’ll always be because that’s the way they’ve been in the past.”
But Elon thinks this way of reasoning is “pretty dumb” and prevents people from arriving at new and better ideas.
At the time, the cost of batteries were $600 per kilowatt hour (kWh). But Elon suggests he can do better using first principles thinking:
“So first principles thinking would be to say, okay, what are the material constituents of the batteries? What is the spot market value of the material constituents? It’s got cobalt, nickel, aluminum, carbon, some polymers for separation, and a steel can. So break that down on a material basis and say, okay, if we bought that on the London Metal Exchange, what would each of those things cost? It’s $80/kWh. So clearly, you just need to think of clever ways to take those materials and combine them into the shape of a battery cell. And then you can have batteries that are much, much cheaper than anyone realizes.”
In 2023, the price for electric vehicle battery packs hit a new low of $128/kWh ($95/kWh in 2012, adjusted for inflation).
Video source: @kevinrose (2012)
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Elon Musk explains first principles thinking and uses it to predict 80%+ decline in battery prices
“First principles is a kind of physics way of looking at the world. And what that really means is you boil things down to the most fundamental truths and then reason up from there.”
People typically reason by analogy because it’s easier—we do something because that’s the way it has always been done or it’s what everyone else is doing.
First principles thinking requires a lot more energy, but it’s useful for inventing new things.
Elon gives battery prices as an example.
In this 2012 interview, he recounts how everyone told him: “battery packs are really expensive and that’s the way they’ll always be because that’s the way they’ve been in the past.”
But Elon thinks this way of reasoning is “pretty dumb” and prevents people from arriving at new and better ideas.
At the time, the cost of batteries were $600 per kilowatt hour (kWh). But Elon suggests he can do better using first principles thinking:
“So first principles thinking would be to say, okay, what are the material constituents of the batteries? What is the spot market value of the material constituents? It’s got cobalt, nickel, aluminum, carbon, some polymers for separation, and a steel can. So break that down on a material basis and say, okay, if we bought that on the London Metal Exchange, what would each of those things cost? It’s $80/kWh. So clearly, you just need to think of clever ways to take those materials and combine them into the shape of a battery cell. And then you can have batteries that are much, much cheaper than anyone realizes.”
In 2023, the price for electric vehicle battery packs hit a new low of $128/kWh ($95/kWh in 2012, adjusted for inflation).
Video source: @kevinrose (2012)
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Offshore
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App Economy Insights
$MCD McDonald's Q3 FY24:
• Global comparable sales -1.5% Y/Y.
• Systemwide sales flat Y/Y.
• Revenue +3% Y/Y to $6.9B ($50M beat).
• Non-GAAP EPS $3.23 ($0.03 beat). https://t.co/5do15ry6VP
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$MCD McDonald's Q3 FY24:
• Global comparable sales -1.5% Y/Y.
• Systemwide sales flat Y/Y.
• Revenue +3% Y/Y to $6.9B ($50M beat).
• Non-GAAP EPS $3.23 ($0.03 beat). https://t.co/5do15ry6VP
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Offshore
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Dimitry Nakhla | Babylon Capital®
A sober valuation analysis on $GOOG 🧘🏽♂️
•NTM P/E Ratio: 20.89x
•10-Year Mean: 23.60x
•NTM FCF Yield: 4.21%
•10-Year Mean: 4.17%
As you can see, $GOOG appears to be trading below fair value
Going forward, investors can receive ~13% MORE in earnings per share & ~1% MORE in FCF per share 🧠***
Before we get into valuation, let’s take a look at why $GOOG is a great business
BALANCE SHEET✅
•Cash & Short-Term Inv: $100.73B
•Long-Term Debt: $11.88B
$GOOG has a strong balance sheet, an AA+ S&P Credit Rating & 303x FFO Interest Coverage
RETURN ON CAPITAL✅
•2019: 16.4%
•2020: 16.2%
•2021: 27.6%
•2022: 26.1%
•2023: 28.1%
•LTM: 30.9%
RETURN ON EQUITY✅
•2019: 18.1%
•2020: 19.0%
•2021: 32.1%
•2022: 23.6%
•2023: 27.4%
•LTM: 30.9%
$GOOG has strong return metrics, highlighting the financial efficiency of the business
REVENUES✅
•2018: $136.82B
•2023: $307.39
•CAGR: 17.57%
FREE CASH FLOW✅
•2018: $22.83B
•2023: $69.50B
•CAGR: 24.93%
NORMALIZED EPS✅
•2018: $2.19
•2023: $5.80
•CAGR: 21.50%
SHARE BUYBACKS✅
•2018 Shares Outstanding: 14.07B
•LTM Shares Outstanding: 12.58B
By reducing its shares outstanding ~10.5%, $GOOG increased its EPS by ~11.7% (assuming 0 growth)
MARGINS✅
•LTM Gross Margins: 57.6%
•LTM Operating Margins: 31.0%
•LTM Net Income Margins: 26.7%
***NOW TO VALUATION 🧠
As stated above, investors can expect to receive ~13% MORE in EPS & ~1% MORE in FCF per share
Using Benjamin Graham’s 2G rule of thumb, $GOOG has to grow earnings at a 10.45% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2024 - 2026 EPS growth over the next few years to be more than the (10.45%) required growth rate:
2024E: $7.66 (32.0% YoY) *FY Dec
2025E: $8.70 (13.7% YoY)
2026E: $9.98 (14.7% YoY)
$GOOG has an excellent track record of meeting analyst estimates ~2 years out, so let’s assume $GOOG ends 2026 with $9.98 in EPS & see its CAGR potential assuming different multiples
23x P/E: $229.54💵 … ~15.9% CAGR
22x P/E: $219.56💵 … ~13.5% CAGR
21x P/E: $209.58💵 … ~11.1% CAGR
20x P/E: $199.60💵 … ~8.7% CAGR
19x P/E: $189.62💵 … ~6.2% CAGR
As you can see, $GOOG appears to have attractive return potential IF we assume >21x earnings (a multiple below its 5-year & 10-year mean)
At >23x earnings, $GOOG CAGR potential is excellent & it’s not unreasonable for the business to even trade for ~23x (given its growth rate, moat, balance sheet, & exemplary capital allocation)
Although those buying today have a slightly less margin of safety than those who accumulated a few months ago when $GOOG traded for $150 …
Today at $168💵 $GOOG still appears to be a good consideration for investment
#stocks #investing $GOOGL
___
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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A sober valuation analysis on $GOOG 🧘🏽♂️
•NTM P/E Ratio: 20.89x
•10-Year Mean: 23.60x
•NTM FCF Yield: 4.21%
•10-Year Mean: 4.17%
As you can see, $GOOG appears to be trading below fair value
Going forward, investors can receive ~13% MORE in earnings per share & ~1% MORE in FCF per share 🧠***
Before we get into valuation, let’s take a look at why $GOOG is a great business
BALANCE SHEET✅
•Cash & Short-Term Inv: $100.73B
•Long-Term Debt: $11.88B
$GOOG has a strong balance sheet, an AA+ S&P Credit Rating & 303x FFO Interest Coverage
RETURN ON CAPITAL✅
•2019: 16.4%
•2020: 16.2%
•2021: 27.6%
•2022: 26.1%
•2023: 28.1%
•LTM: 30.9%
RETURN ON EQUITY✅
•2019: 18.1%
•2020: 19.0%
•2021: 32.1%
•2022: 23.6%
•2023: 27.4%
•LTM: 30.9%
$GOOG has strong return metrics, highlighting the financial efficiency of the business
REVENUES✅
•2018: $136.82B
•2023: $307.39
•CAGR: 17.57%
FREE CASH FLOW✅
•2018: $22.83B
•2023: $69.50B
•CAGR: 24.93%
NORMALIZED EPS✅
•2018: $2.19
•2023: $5.80
•CAGR: 21.50%
SHARE BUYBACKS✅
•2018 Shares Outstanding: 14.07B
•LTM Shares Outstanding: 12.58B
By reducing its shares outstanding ~10.5%, $GOOG increased its EPS by ~11.7% (assuming 0 growth)
MARGINS✅
•LTM Gross Margins: 57.6%
•LTM Operating Margins: 31.0%
•LTM Net Income Margins: 26.7%
***NOW TO VALUATION 🧠
As stated above, investors can expect to receive ~13% MORE in EPS & ~1% MORE in FCF per share
Using Benjamin Graham’s 2G rule of thumb, $GOOG has to grow earnings at a 10.45% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2024 - 2026 EPS growth over the next few years to be more than the (10.45%) required growth rate:
2024E: $7.66 (32.0% YoY) *FY Dec
2025E: $8.70 (13.7% YoY)
2026E: $9.98 (14.7% YoY)
$GOOG has an excellent track record of meeting analyst estimates ~2 years out, so let’s assume $GOOG ends 2026 with $9.98 in EPS & see its CAGR potential assuming different multiples
23x P/E: $229.54💵 … ~15.9% CAGR
22x P/E: $219.56💵 … ~13.5% CAGR
21x P/E: $209.58💵 … ~11.1% CAGR
20x P/E: $199.60💵 … ~8.7% CAGR
19x P/E: $189.62💵 … ~6.2% CAGR
As you can see, $GOOG appears to have attractive return potential IF we assume >21x earnings (a multiple below its 5-year & 10-year mean)
At >23x earnings, $GOOG CAGR potential is excellent & it’s not unreasonable for the business to even trade for ~23x (given its growth rate, moat, balance sheet, & exemplary capital allocation)
Although those buying today have a slightly less margin of safety than those who accumulated a few months ago when $GOOG traded for $150 …
Today at $168💵 $GOOG still appears to be a good consideration for investment
#stocks #investing $GOOGL
___
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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Ahmad Jivraj
Columbia Business School Professor Joel Greenblatt returned 40% per year for over a decade.
He asked his students: Why do stock prices fluctuate so much?
His Answer: "I don’t know and I don’t care. I just want to take advantage of it."
Prices fluctuate much more than business values...therein lies the opportunity!
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Columbia Business School Professor Joel Greenblatt returned 40% per year for over a decade.
He asked his students: Why do stock prices fluctuate so much?
His Answer: "I don’t know and I don’t care. I just want to take advantage of it."
Prices fluctuate much more than business values...therein lies the opportunity!
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App Economy Insights
$PYPL PayPal Q3 FY24:
• TPV +9% Y/Y fx neutral to $423B.
• Active accounts +1% Y/Y to 432M.
• Transactions per active +9% Y/Y to 61.
• Revenue +6% Y/Y to $7.8B ($90M miss).
• Non-GAAP EPS $1.20 ($0.13 beat).
• Q4 FY24 rev. guidance low single-digit. https://t.co/dasIorZ4S2
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$PYPL PayPal Q3 FY24:
• TPV +9% Y/Y fx neutral to $423B.
• Active accounts +1% Y/Y to 432M.
• Transactions per active +9% Y/Y to 61.
• Revenue +6% Y/Y to $7.8B ($90M miss).
• Non-GAAP EPS $1.20 ($0.13 beat).
• Q4 FY24 rev. guidance low single-digit. https://t.co/dasIorZ4S2
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