⁠Hidden Value Gems
Do you make New Year resolutions? 🎅🎄
- Yes, and it works
- Yes, but it doesn’t work
- No
- No, but I will try it
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⁠InsideArbitrage
RT @dividendology: A Dividend King is a company that has increased its dividends for at least 50 consecutive years.

There were 2 new additions to this list in 2024:

- $ADP
- $ED

And 3 companies were removed:

- $MMM
- $LEG
- $WBA

You can see the full list of 2025 Dividend Kings here: https://t.co/Vc2ybSmckx
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⁠Startup Archive
Scale AI CEO Alexandr Wang explains his “MEI” hiring policy

In June of 2024, Alexandr announced a new hiring policy called MEI, which stands for merit, excellence, and intelligence.

“The basic idea is in every role we’re going to hire the best possible person, regardless of their demographics. And we’re not going to do any sort of quota-based optimization of our workforce to meet certain demographic targets.”

He continues:

“That doesn’t mean we don’t care about diversity. We actually care about having diverse pipelines and diverse top-of-funnel for all of our roles. But at the end of the day, the best, most capable person for every job is going to be the one that we hire.”

Alexandr acknowledges that this was mildly controversial, and there are legitimate questions about how much social responsibility companies should bear. But overall his philosophy seems to echo the ideas popularized by Coinbase founder Brian Armstrong of building a “mission-focused company.” Brian put it this way in a 2020 blog post:

“It has become common for Silicon Valley companies to engage in a wide variety of social activism, even those unrelated to what the company does, and there are certainly employees who really want this in the company they work for. So why have we decided to take a different approach? The reason is that while I think these efforts are well intentioned, they have the potential to destroy a lot of value at most companies, both by being a distraction, and by creating internal division. […] Even if we all agree that something is a problem, we may not agree on how to actually go solve it […] Change happens in the world only when a smart, talented, group of people come together to focus on a hard problem for a decade or more. Many companies never stand the test of time, because they decide to dabble in unrelated efforts, and distract and divide their workforce in the process. Paradoxically, by being laser focused on our mission, we will likely have an even greater impact on the world, through our products and growing customer base.”

Video source: @a16z (2024)
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⁠Stock Analysis Compilation
Diamond Hill on Builders FirstSource $BLDR US

Thesis: BFS is capitalizing on strong housing demand and innovative digital solutions to grow market share and deliver shareholder value

(Extract from their Q3 letter) https://t.co/7p1dm4Gyl1
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⁠Ahmad Jivraj
🧵The January Effect: This day in stock market history (December 31, 1976)

1/The 'January Effect' was first documented by investment banker Sidney Wachtel. He noticed small-cap stocks outperformed in January. Here's how this discovery changed market dynamics...
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⁠Quiver Quantitative
We’ve been writing code to track politicians’ portfolios.

Here’s an update: https://t.co/EsqF9VX7yU
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⁠Dimitry Nakhla | Babylon Capital®
A quality valuation analysis on $CNI 🧘🏽‍♂️

•NTM P/E Ratio: 18.02x
•10-Year Mean: 19.89x

•NTM FCF Yield: 3.86%
•10-Year Mean: 3.51%

As you can see, $CNI appears to be trading slightly below fair value

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

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

BALANCE SHEET🆗
•Cash & Short-Term Inv: $201.88M
•Long-Term Debt: $13.76B

$CNI has an ok balance sheet, an A- S&P Credit Rating, & 8.29x FFO Interest Coverage Ratio

RETURN ON CAPITAL🆗
•2020: 14.7%
•2021: 13.4%
•2022: 15.6%
•2023: 14.4%
•LTM: 13.7%

RETURN ON EQUITY✅
•2020: 18.8%
•2021: 23.1%
•2022: 23.2%
•2023: 27.1%
•LTM: 27.6%

$CNI has decent return metrics, highlighting the financial efficiency of the business

REVENUES❌
•2013: $9.95B
•2023: $12.70B
•CAGR: 2.47%

FREE CASH FLOW🆗
•2013: $1.48B
•2023: $2.85B
•CAGR: 6.77%

NORMALIZED EPS🆗
•2013: $2.74
•2023: $5.41
•CAGR: 7.03%

SHARE BUYBACKS✅
•2013 Shares Outstanding: 846.10M
•LTM Shares Outstanding: 639.08M

By reducing its shares outstanding 24.4%, $CNI increased its EPS by 32% (assuming 0 growth)

MARGINS✅
•LTM Gross Margins: 55.1%
•LTM Operating Margins: 40.6%
•LTM Net Income Margins: 31.7%

***NOW TO VALUATION 🧠

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

Using Benjamin Graham’s 2G rule of thumb, $CNI has to grow earnings at a 9.01% CAGR over the next several years to justify its valuation

Today, analysts anticipate 2025 - 2027 EPS growth over the next few years to be less than the (18.49%) required growth rate:

2025E: $5.76 (12.7% YoY) *FY Dec
2026E: $6.45 (12.2% YoY)
2027E $7.20 (10.4% YoY)

$CNI has a great track record of meeting analyst estimates ~2 years out, but let’s assume $CNI ends 2027 with $7.20 in EPS & see its CAGR potential assuming different multiples

20x P/E: $144.00💵 … ~14.7% CAGR

19x P/E: $136.80💵 … ~12.8% CAGR

18x P/E: $129.60💵 … ~10.9% CAGR

17x P/E: $122.40💵 … ~8.0% CAGR

As you can see, $CNI appears to have double-digit return potential if we assume >18x earnings, a level slightly below its 10-year average multiple of 19.89x

However, this assumption doesn’t leave us with too much margin of safety considering $CNI can be cyclical at times and trade for ~16x during economic slowdowns

Also, given its modest growth rates & heavy capital expenditures, investors primarily concerned with total return potential will likely do better elsewhere

$CNI is a decent deal today at $101💵 for those primarily concerned with owning a low-volatility name with reliable dividend income & growth

I’ll be more interested in accumulating $CNI if it trades closer to $90💵 or at ~16.25x NTM estimates (~10% below today’s price) where I can reasonably assume ~13% CAGR while relying on a 17x multiple … I’d consider $90💵 extremely attractive (given today’s information & expectations)

#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.

𝐈𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢�[...]

�𝐧 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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⁠Stock Analysis Compilation
Analysis of BlueBird Corporation $BLBD US - 2024 Darden at Virginia Investing Challenge (2nd Place)

Thesis: BlueBird is positioned for growth through its leadership in alternative powertrains and expanding EV adoption in the school bus market

(Extract from the Graham Doddsville Fall 2024 Issue)
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⁠App Economy Insights
📊 Earnings season visualized.

200+ companies covered.

Grab the December report.👇
https://t.co/APdjYK7vr3 https://t.co/uZ7IUa7Nd7
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