Offshore
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โ The Kobeissi Letter
BREAKING: US equity funds have seen a record $156 billion in net inflows year-to-date.
This has tripled from the previous year and has surpassed the $154 billion seen in 2021.
At the same time, global equity funds have attracted $250 billion in inflows, twice as much as in 2024.
This is only below the record $413 billion posted in 2021.
Despite recent volatility, investors are looking for bargains.
Inflows remain strong for now.
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BREAKING: US equity funds have seen a record $156 billion in net inflows year-to-date.
This has tripled from the previous year and has surpassed the $154 billion seen in 2021.
At the same time, global equity funds have attracted $250 billion in inflows, twice as much as in 2024.
This is only below the record $413 billion posted in 2021.
Despite recent volatility, investors are looking for bargains.
Inflows remain strong for now.
tweet
Offshore
Video
โ The All-In Podcast
David Friedberg Explains the Hidden Key Behind Trade Discussions: Regulatory Parity ๐บ๐ธ
@friedberg on E225:
"There's a lot of conversations about tariffs and about trade deficits, but very little about regulatory parity."
"And I think that this is really critical for these trade negotiations to actually resolve to a positive outcome for American businesses and American enterprises, because there is not parity in how American businesses can do their work overseas relative to how foreign companies can do work in the US."
"So if you're an Indian company and you want to sell something in the US, you set up an LLC, you set up a bank account, you set up a store, you take a lease, and you sell your product."
"There is not a lot of hoops and challenges to that business operating in the United States."
"The stories around the world start to paint the picture of why American businesses find it so hard to develop international markets and sell into those countries, when in the US we make it so easy for companies based in foreign countries to come and sell in America."
"And that's a big part of where the trade imbalances arise from. It's not just because Vietnamese people can't afford expensive American goods, it's because it's so much more regulatorily difficult to do work in these countries."
"They can come in and take your IP."
"And so I think that this is a really important part of the trade discussions and negotiations that a lot of people miss, that American businesses will see massive revenue growth and massive market adoption if we can get regulatory parody in some of these key trade deals that are being negotiated."
tweet
David Friedberg Explains the Hidden Key Behind Trade Discussions: Regulatory Parity ๐บ๐ธ
@friedberg on E225:
"There's a lot of conversations about tariffs and about trade deficits, but very little about regulatory parity."
"And I think that this is really critical for these trade negotiations to actually resolve to a positive outcome for American businesses and American enterprises, because there is not parity in how American businesses can do their work overseas relative to how foreign companies can do work in the US."
"So if you're an Indian company and you want to sell something in the US, you set up an LLC, you set up a bank account, you set up a store, you take a lease, and you sell your product."
"There is not a lot of hoops and challenges to that business operating in the United States."
"The stories around the world start to paint the picture of why American businesses find it so hard to develop international markets and sell into those countries, when in the US we make it so easy for companies based in foreign countries to come and sell in America."
"And that's a big part of where the trade imbalances arise from. It's not just because Vietnamese people can't afford expensive American goods, it's because it's so much more regulatorily difficult to do work in these countries."
"They can come in and take your IP."
"And so I think that this is a really important part of the trade discussions and negotiations that a lot of people miss, that American businesses will see massive revenue growth and massive market adoption if we can get regulatory parody in some of these key trade deals that are being negotiated."
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Offshore
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โ Finding Compounders
Terry Smith on The Unique Advantage of Equity Investment https://t.co/3emx0gkndo
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Terry Smith on The Unique Advantage of Equity Investment https://t.co/3emx0gkndo
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Offshore
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โ The Kobeissi Letter
US executives have rarely been this pessimistic about the economy:
The ratio of S&P 500 companies' mentions of โbetterโ or โstrongerโ versus โworseโ or โweakerโ during Q1 2025 earnings calls hit ~1.7x, the lowest since 2008.
By comparison, the ratio was 3.1x in the prior quarter, or nearly twice as high.
Even during 2020 this indicator was higher, at 2.0x.
Along with skyrocketing uncertainty, companies are having difficulty giving guidance.
It's clear an economic slowdown is imminent.
tweet
US executives have rarely been this pessimistic about the economy:
The ratio of S&P 500 companies' mentions of โbetterโ or โstrongerโ versus โworseโ or โweakerโ during Q1 2025 earnings calls hit ~1.7x, the lowest since 2008.
By comparison, the ratio was 3.1x in the prior quarter, or nearly twice as high.
Even during 2020 this indicator was higher, at 2.0x.
Along with skyrocketing uncertainty, companies are having difficulty giving guidance.
It's clear an economic slowdown is imminent.
tweet
Offshore
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โ Dimitry Nakhla | Babylon Capitalยฎ
RT @DimitryNakhla: Lam Research $LRCX Q3 Earnings Report๐ฏ
Rev: $4.72B vs $4.59B estโ | +24% YoY
EPS: $1.04 vs $0.98 est โ | +33% YoY
Q4 Guidance โฌ๏ธ
Rev: $5.00B est (+/- $300M)
EPS: $1.20 est (+/- $0.10) https://t.co/BYYvCiYITK
A quality valuation analysis on $LRCX ๐ง๐ฝโโ๏ธ
โขNTM P/E Ratio: 16.66x
โข10-Year Mean: 20.20x
โขNTM FCF Yield: 6.80%
โข10-Year Mean: 5.51%
As you can see, $LRCX appears to be trading below fair value
Going forward, investors can receive ~21% MORE in earnings per share & ~23% MORE in FCF per share ๐ง ***
Before we get into valuation, letโs take a look at why $LRCX is a good business
BALANCE SHEETโ
โขCash & Short-Term Inv: $5.67B
โขLong-Term Debt: $4.48B
$LRCX has a strong balance sheet, an A- S&P Credit Rating & 25x FFO Interest Coverage
RETURN ON CAPITALโ
โข2021: 40.0%
โข2022: 46.8%
โข2023: 39.3%
โข2024: 31.3%
โขLTM: 34.9%
RETURN ON EQUITYโ
โข2021: 69.8%
โข2022: 74.8%
โข2023: 62.3%
โข2024: 45.7%
โขLTM: 50.4%
$LRCX has strong return metrics, highlighting the financial efficiency of the business
REVENUESโ
โข2014: $4.61B
โข2024: $14.91B
โขCAGR: 12.45%
FREE CASH FLOWโ
โข2014: $571.55M
โข2024: $4.26B
โขCAGR: 22.24%
NORMALIZED EPSโ
โข2014: $0.44
โข2024: $3.03
โขCAGR: 21.28%
PAID DIVIDENDSโ
โข2019: $0.44
โข2024: $0.80
โขCAGR: 12.70%
SHARE BUYBACKSโ
โข2015 Shares Outstanding: 1.77B
โขLTM Shares Outstanding: 1.30B
By reducing its shares outstanding ~26%, $LRCX increased its EPS by ~35% (assuming 0 growth)
MARGINSโ
โขLTM Gross Margins: 47.7%
โขLTM Operating Margins: 29.7%
โขLTM Net Income Margins: 26.5%
***NOW TO VALUATION ๐ง
As stated above, investors can expect to receive ~21% MORE in EPS & ~23% MORE in FCF per share
Using Benjamin Grahamโs 2G rule of thumb, $LRCX has to grow earnings at an 8.33% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2025 - 2028 EPS growth over the next few years to be more than the (8.33%) required growth rate:
2025E: $3.75 (23.7% YoY) *FY Jun
2026E: $3.88 (3.6% YoY)
2027E: $4.65 (19.8% YoY)
2028E: $5.50 (18.3% YoY)
$LRCX has a decent track record of meeting analyst estimates ~2 years out, but letโs assume $LRCX ends FY 2028 with $5.50 in EPS & see its CAGR potential assuming different multiples:
20x P/E: $110.00๐ต โฆ ~20.2% CAGR
19x P/E: $104.50๐ต โฆ ~18.3% CAGR
18x P/E: $99.00๐ต โฆ ~16.4% CAGR
17x P/E: $93.50๐ต โฆ ~14.3% CAGR
16x P/E: $88.00๐ต โฆ ~12.2% CAGR
While itโs certainly reasonable for $LRCX to trade for 18x - 20x, I wouldnโt want to rely on that assumption as it doesnโt leave us with a substantial margin of safety
Yet, $LRCX still appears to have attractive return potential if we assume 16x - 17x, a multiple thatโs justified by its excellent capital allocation, wide moat & growth rate
Moreover, $LRCX derives a large portion of its revenues from memory chip production, which is a strong growth driver for the company
~40% of revenue comes from recurring-like services, making $LRCX more predictable softening sector volatility
Today at $63๐ต $LRCX appears to be a great consideration, with some margin of safety
Given its high uncertainty, Iโd buy in tranches and leave some room to add more if it declines further, e.g. 1/3 at $63, 1/3 at $55, 1/3 at $50
___
๐๐๐๐๐๐๐๐๐๐โผ๏ธ: ๐๐ก๐ข๐ฌ ๐ข๐ฌ ๐๐๐ ๐๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐. ๐๐๐๐ฒ๐ฅ๐จ๐ง ๐๐๐ฉ๐ข๐ญ๐๐ฅยฎ ๐๐ง๐ ๐ข๐ญ๐ฌ ๐ซ๐๐ฉ๐ซ๐๐ฌ๐๐ง๐ญ๐๐ญ๐ข๐ฏ๐๐ฌ ๐ฆ๐๐ฒ ๐ก๐๐ฏ๐ ๐ฉ๐จ๐ฌ๐ข๐ญ๐ข๐จ๐ง๐ฌ ๐ข๐ง ๐ญ๐ก๐ ๐ฌ๐๐๐ฎ๐ซ๐ข๐ญ๐ข๐๐ฌ ๐๐ข๐ฌ๐๐ฎ๐ฌ๐ฌ๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ.
๐๐ก๐ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ข๐ฌ ๐ข๐ง๐ญ๐๐ง๐๐๐ ๐๐จ๐ซ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง๐๐ฅ ๐ฉ๐ฎ๐ซ๐ฉ๐จ๐ฌ๐๐ฌ ๐จ๐ง๐ฅ๐ฒ ๐๐ง๐ ๐ฌ๐ก๐จ๐ฎ๐ฅ๐ ๐ง๐จ๐ญ ๐๐ ๐๐จ๐ง๐ฌ๐ญ๐ซ๐ฎ๐๐ ๐๐ฌ ๐ข๐ง[...]
RT @DimitryNakhla: Lam Research $LRCX Q3 Earnings Report๐ฏ
Rev: $4.72B vs $4.59B estโ | +24% YoY
EPS: $1.04 vs $0.98 est โ | +33% YoY
Q4 Guidance โฌ๏ธ
Rev: $5.00B est (+/- $300M)
EPS: $1.20 est (+/- $0.10) https://t.co/BYYvCiYITK
A quality valuation analysis on $LRCX ๐ง๐ฝโโ๏ธ
โขNTM P/E Ratio: 16.66x
โข10-Year Mean: 20.20x
โขNTM FCF Yield: 6.80%
โข10-Year Mean: 5.51%
As you can see, $LRCX appears to be trading below fair value
Going forward, investors can receive ~21% MORE in earnings per share & ~23% MORE in FCF per share ๐ง ***
Before we get into valuation, letโs take a look at why $LRCX is a good business
BALANCE SHEETโ
โขCash & Short-Term Inv: $5.67B
โขLong-Term Debt: $4.48B
$LRCX has a strong balance sheet, an A- S&P Credit Rating & 25x FFO Interest Coverage
RETURN ON CAPITALโ
โข2021: 40.0%
โข2022: 46.8%
โข2023: 39.3%
โข2024: 31.3%
โขLTM: 34.9%
RETURN ON EQUITYโ
โข2021: 69.8%
โข2022: 74.8%
โข2023: 62.3%
โข2024: 45.7%
โขLTM: 50.4%
$LRCX has strong return metrics, highlighting the financial efficiency of the business
REVENUESโ
โข2014: $4.61B
โข2024: $14.91B
โขCAGR: 12.45%
FREE CASH FLOWโ
โข2014: $571.55M
โข2024: $4.26B
โขCAGR: 22.24%
NORMALIZED EPSโ
โข2014: $0.44
โข2024: $3.03
โขCAGR: 21.28%
PAID DIVIDENDSโ
โข2019: $0.44
โข2024: $0.80
โขCAGR: 12.70%
SHARE BUYBACKSโ
โข2015 Shares Outstanding: 1.77B
โขLTM Shares Outstanding: 1.30B
By reducing its shares outstanding ~26%, $LRCX increased its EPS by ~35% (assuming 0 growth)
MARGINSโ
โขLTM Gross Margins: 47.7%
โขLTM Operating Margins: 29.7%
โขLTM Net Income Margins: 26.5%
***NOW TO VALUATION ๐ง
As stated above, investors can expect to receive ~21% MORE in EPS & ~23% MORE in FCF per share
Using Benjamin Grahamโs 2G rule of thumb, $LRCX has to grow earnings at an 8.33% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2025 - 2028 EPS growth over the next few years to be more than the (8.33%) required growth rate:
2025E: $3.75 (23.7% YoY) *FY Jun
2026E: $3.88 (3.6% YoY)
2027E: $4.65 (19.8% YoY)
2028E: $5.50 (18.3% YoY)
$LRCX has a decent track record of meeting analyst estimates ~2 years out, but letโs assume $LRCX ends FY 2028 with $5.50 in EPS & see its CAGR potential assuming different multiples:
20x P/E: $110.00๐ต โฆ ~20.2% CAGR
19x P/E: $104.50๐ต โฆ ~18.3% CAGR
18x P/E: $99.00๐ต โฆ ~16.4% CAGR
17x P/E: $93.50๐ต โฆ ~14.3% CAGR
16x P/E: $88.00๐ต โฆ ~12.2% CAGR
While itโs certainly reasonable for $LRCX to trade for 18x - 20x, I wouldnโt want to rely on that assumption as it doesnโt leave us with a substantial margin of safety
Yet, $LRCX still appears to have attractive return potential if we assume 16x - 17x, a multiple thatโs justified by its excellent capital allocation, wide moat & growth rate
Moreover, $LRCX derives a large portion of its revenues from memory chip production, which is a strong growth driver for the company
~40% of revenue comes from recurring-like services, making $LRCX more predictable softening sector volatility
Today at $63๐ต $LRCX appears to be a great consideration, with some margin of safety
Given its high uncertainty, Iโd buy in tranches and leave some room to add more if it declines further, e.g. 1/3 at $63, 1/3 at $55, 1/3 at $50
___
๐๐๐๐๐๐๐๐๐๐โผ๏ธ: ๐๐ก๐ข๐ฌ ๐ข๐ฌ ๐๐๐ ๐๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐. ๐๐๐๐ฒ๐ฅ๐จ๐ง ๐๐๐ฉ๐ข๐ญ๐๐ฅยฎ ๐๐ง๐ ๐ข๐ญ๐ฌ ๐ซ๐๐ฉ๐ซ๐๐ฌ๐๐ง๐ญ๐๐ญ๐ข๐ฏ๐๐ฌ ๐ฆ๐๐ฒ ๐ก๐๐ฏ๐ ๐ฉ๐จ๐ฌ๐ข๐ญ๐ข๐จ๐ง๐ฌ ๐ข๐ง ๐ญ๐ก๐ ๐ฌ๐๐๐ฎ๐ซ๐ข๐ญ๐ข๐๐ฌ ๐๐ข๐ฌ๐๐ฎ๐ฌ๐ฌ๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ.
๐๐ก๐ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ข๐ฌ ๐ข๐ง๐ญ๐๐ง๐๐๐ ๐๐จ๐ซ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง๐๐ฅ ๐ฉ๐ฎ๐ซ๐ฉ๐จ๐ฌ๐๐ฌ ๐จ๐ง๐ฅ๐ฒ ๐๐ง๐ ๐ฌ๐ก๐จ๐ฎ๐ฅ๐ ๐ง๐จ๐ญ ๐๐ ๐๐จ๐ง๐ฌ๐ญ๐ซ๐ฎ๐๐ ๐๐ฌ ๐ข๐ง[...]
Offshore
โ Dimitry Nakhla | Babylon Capitalยฎ RT @DimitryNakhla: Lam Research $LRCX Q3 Earnings Report๐ฏ Rev: $4.72B vs $4.59B estโ
| +24% YoY EPS: $1.04 vs $0.98 est โ
| +33% YoY Q4 Guidance โฌ๏ธ Rev: $5.00B est (+/- $300M) EPS: $1.20 est (+/- $0.10) https://t.co/BYYvCiYITKโฆ
๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐ ๐ญ๐จ ๐ฆ๐๐๐ญ ๐ญ๐ก๐ ๐ฌ๐ฉ๐๐๐ข๐๐ข๐ ๐ง๐๐๐๐ฌ ๐จ๐ ๐๐ง๐ฒ ๐ข๐ง๐๐ข๐ฏ๐ข๐๐ฎ๐๐ฅ ๐จ๐ซ ๐ฌ๐ข๐ญ๐ฎ๐๐ญ๐ข๐จ๐ง. ๐๐๐ฌ๐ญ ๐ฉ๐๐ซ๐๐จ๐ซ๐ฆ๐๐ง๐๐ ๐ข๐ฌ ๐ง๐จ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐ ๐จ๐ ๐๐ฎ๐ญ๐ฎ๐ซ๐ ๐ซ๐๐ฌ๐ฎ๐ฅ๐ญ๐ฌ.
๐๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ก๐๐ฌ ๐๐๐๐ง ๐จ๐๐ญ๐๐ข๐ง๐๐ ๐๐ซ๐จ๐ฆ ๐ฌ๐จ๐ฎ๐ซ๐๐๐ฌ ๐๐๐ฅ๐ข๐๐ฏ๐๐ ๐ญ๐จ ๐๐ ๐ซ๐๐ฅ๐ข๐๐๐ฅ๐, ๐๐ฎ๐ญ ๐ข๐ฌ ๐ง๐จ๐ญ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐๐ ๐๐ฌ ๐ญ๐จ ๐๐จ๐ฆ๐ฉ๐ฅ๐๐ญ๐๐ง๐๐ฌ๐ฌ ๐จ๐ซ ๐๐๐๐ฎ๐ซ๐๐๐ฒ. - Dimitry Nakhla | Babylon Capitalยฎ tweet
๐๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ก๐๐ฌ ๐๐๐๐ง ๐จ๐๐ญ๐๐ข๐ง๐๐ ๐๐ซ๐จ๐ฆ ๐ฌ๐จ๐ฎ๐ซ๐๐๐ฌ ๐๐๐ฅ๐ข๐๐ฏ๐๐ ๐ญ๐จ ๐๐ ๐ซ๐๐ฅ๐ข๐๐๐ฅ๐, ๐๐ฎ๐ญ ๐ข๐ฌ ๐ง๐จ๐ญ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐๐ ๐๐ฌ ๐ญ๐จ ๐๐จ๐ฆ๐ฉ๐ฅ๐๐ญ๐๐ง๐๐ฌ๐ฌ ๐จ๐ซ ๐๐๐๐ฎ๐ซ๐๐๐ฒ. - Dimitry Nakhla | Babylon Capitalยฎ tweet
Offshore
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โ The Kobeissi Letter
What type of goods does the US import from China?
63% of imported goods from China are final products such as clothing and electronics purchased by US consumers.
37% of US imports are intermediate goods that are exploited in US production.
These goods are particularly used in the machinery, tool, and auto industries.
Meanwhile, US small and medium businesses account for 41% of imports from China.
Therefore, a significant surge in tariffs on China will increase not only the prices of imported goods, but also the production costs for domestic companies.
We expect to see price increases if tariffs are sustained.
tweet
What type of goods does the US import from China?
63% of imported goods from China are final products such as clothing and electronics purchased by US consumers.
37% of US imports are intermediate goods that are exploited in US production.
These goods are particularly used in the machinery, tool, and auto industries.
Meanwhile, US small and medium businesses account for 41% of imports from China.
Therefore, a significant surge in tariffs on China will increase not only the prices of imported goods, but also the production costs for domestic companies.
We expect to see price increases if tariffs are sustained.
tweet