⁠Brandon Beylo
RT @marketplunger1: It takes 29 years to develop a new mine in the United States.

But yes, we'll have the metals we need to achieve Net Zero by 2050.

And we'll do it without China's help.

Lol.

#mining #commodities https://t.co/g9Z3cgtf7L
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⁠Brandon Beylo
RT @marketplunger1: Bruce Greenwald invited Li Lu to speak to his class on value investing.

The result is a 90 minute masterclass on how to be a value investor.

If you haven't watched the video, do it now.

If you have, it's worth re-watching.

Here is a list of my favorite quotes from Li Lu 👇

PERSONALITY OF A VALUE INVESTOR

• "Understand who you are as an investor, because you will be tested. You will have to ask yourself if you truly are a value investor."

• "Value investing goes against our evolution of following the crowds to survive."

• "You will spend most of your time as an investigative journalist. To have insatiable curiosity."

• "You almost have to be curious about everything. Because you never know where you'll get that one major insight."

INVESTOR CRITERIA

• Is it cheap?

• Is it a good business?

• Why is this opportunity available to me?

"Once you answer those questions, you really have to go for it."

INVESTMENT CASE STUDY 1: TIMBERLAND

• "The first thing I check in a company is it's valuation."

• "If you're an investor you don't care where it traded before."

• "What matters isn't the price-to-book ratio itself, but what's in the book value."

• "You want to compare the capital invested in the business to how much pre-tax cash flow the business generates using that capital."

• "So Timberland generated $100M on $200M in capital invested. So why does the opportunity exist?"

- Nike, Reebok, all the shoe brands fell off a cliff during the Asian Financial Crisis.

- Founder owns 40% of the stock

- Company was profitable and didn't need financial markets (no sell-side)

- Tons of shareholder lawsuits

• "What would be your conclusion if you were a normal mutual fund hearing this information? That management is milking the company for their own gain."

What does Li Lu do next?

• "I download every file of the shareholder court cases. That's the investigative journalist part."

• "The result was that the founder withdrew guidance and shareholders didn't like it. That was it."

How do you determine if management are decent people?

• "You've got to be an investigative journalist and find the trail of evidence. Go to their community. Introduce yourself to their friends/family/neighbors."

Total Time Commitment: "A couple of weeks of diligent/obsessive work"

• "Investing is intensive work for short bursts of time."

HOW MUCH TO BUY?

• "If you go join a fund, they'll tell you not to risk anything more than 25-50bps."

• "Think about how much effort you put in to this work. You have no downside and its trading at 5x profits."

• "So, I put a shitload of money into Timberland. Over the next 10 years it went up 7x. It was never more than 15x earnings."

• "If you're not a good analyst, you'll NEVER be a good investor."

• "When it goes up, you don't have to do a damn thing. You just sit on it and ride with it."

INVESTMENT CASE STUDY 2: KOREAN COMPANY

• "Don't think about per-share numbers. Think of yourself as an owner."

• "$236M in book value, $60M market cap, $25M net earnings."

How do you know it's cheap?

• "You must confirm that the earnings are there, and that the book value is real, liquid, and tangible."

• "They're trading at the cash value in the bank with no debt. They have hotels and department stores that they own outright. They're making $30M+ in pre-tax earnings. And insiders own 50%."

The result: Went up 5-6x

VALUE INVESTING IS NOT NATURAL

• "There's a lot of money in value investing. But it's still unnatural to most people."

• "One thing you have to do, is you have to do the work. You have to do the reps. You can make a ton of money if you really do this stuff."

• "I benefited by listening AND THEN DOING my[...]

own work. Making my own investments and mistakes."

WHAT MAKES A GREAT ANALYST

• "You must provide accurate and complete information. If you can't succeed on that, you can't succeed in this business."

• "If you're not confident about your prediction and what you know, you can't put any money when the stock's in free fall."

WHAT PROVIDES THE BIGGEST RETURNS

• "Your biggest returns will come from no more than ten tremendous insights. That's it."

• "The only way to build those insights is intense curiosity, intense study."

INVESTING MISTAKES

• "The biggest mistakes come when you buy before you've done all the work."

• "My biggest mistakes aren't buying and losing money. It's not buying and missing out on 50-60x returns."

HOW MANY COMPANIES SHOULD YOU BUY

• "I don't have any set rules on how many stocks or companies I buy. Opportunities are sporadic and it depends on the environment."

• "I usually have 3-4 big ideas. If the market is exciting, I have more opportunities. Or if the market is boring, I have fewer."

HOW LI LU ALLOCATES TIME

• "Most of the time I spend reading and studying about everything. Learning new companies and industries."

• "If I find an idea that captivates me. I stop everything and obsess over that idea."

• "Besides that, I spend a lot of time with my kid and my wife."

TL;DR:

• Be an investigative journalist.

• Work obsessively in short bursts and spend the rest. of your time learning.

• When you've done the work and have conviction, buy a shitload to make it worth it.

• Before you invest $1, make sure you can answer the three big questions: Is it cheap, is the management team good, and why does the opportunity exist.

• Never stop learning.

• Become a curiosity machine.
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⁠Dimitry Nakhla | Babylon Capital®
In November 2023 I suggested: “although I’m not a buyer today, I’d consider $MCD closer to $245💵”

As my research indicated, $MCD traded down to $244💵 & then formed a short-term bottom

Here’s more of the analysis for context:

“$MCD has a good track record of meeting analyst estimates 2 years out so let’s still assume $MCD ends 2025 with $13.53 in EPS & see its CAGR potential assuming different multiples

24x P/E: $324.72💵 … ~11.7% CAGR

22x P/E: $297.66💵 … ~7.2% CAGR

20x P/E: $270.60💵 … ~2.5% CAGR

As you can see, $MCD appears to be trading at a fair valuation relative to growth

However it appears that last month (when $MCD shares traded for $248) was the most opportune time to buy shares

At $248, assuming 22x multiple, $MCD CAGR potential was ~11.6%

That’s pretty attractive (and a reasonable assumption) for a stable & quality business like $MCD that is also a real estate company

*** So, although I’m not a buyer today, I’d consider $MCD closer to $245💵 ***”

I will likely provide an updated $MCD analysis in the next couple weeks (if you’d be interested, feel free to comment below so I can prioritize the analysis & if there’s enough interest, I’ll get to it sooner rather than later)

#stocks #investing"

A sober valuation analysis on $MCD 🧘🏽‍♂️

•NTM P/E Ratio: 22.09x
•10-Year Mean: 22.96x

•NTM FCF Yield: 4.62%
•10-Year Mean: 4.08%

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

Going forward, investors can expect to receive ~4% MORE in earnings per share & ~13% MORE in FCF per share 🧠***

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

BALANCE SHEET✅
•Cash & Equivalents: $3.51B
•Long-Term Debt: $37.35B

$MCD has a decent balance sheet, reflected by its BBB+ S&P Credit Rating & 7x FFO Interest Coverage Ratio

RETURN ON CAPITAL✅
•2018: 33.1%
•2019: 22.0%
•2020: 16.4%
•2021: 21.1%
•2022: 23.1%
•LTM: 24.7%

$MCD has strong return metrics, highlighting the financial efficiency of the business

REVENUES✅
•2017: $22.82B
•2022: $23.18B
•CAGR: 0.31%

$MCD margins have expanded substantially, allowing for more bottom line growth despite flat revenue growth

MARGINS 2017 vs LTM✅
•Gross: 46.5% … 57.2%
•Operating: 36.8% … 46.0%
•Net: 22.8% … 33.3%

FREE CASH FLOW✅
•2017: $3.70B
•2022: $5.49B
•CAGR: 8.21%

NORMALIZED EPS✅
•2017: $6.66
•2022: $10.10
•CAGR: 8.68%

SHARE BUYBACKS✅
•2013 Shares Outstanding: 1.01B
•LTM Shares Outstanding: 0.73B
•Share Decrease: ~38%

By reducing its shares outstanding ~38%, $MCD increased its EPS by ~61% (assuming 0 growth)

PAID DIVIDENDS PER SHARE✅
•2005: $0.67
•2022: $5.66
•CAGR: 13.37%

Lastly, $MCD is a “real estate company” that owns a lot of land (as you can see in the third photo)

***NOW TO VALUATION 🧠

As stated above, investors can expect to receive ~4% more in EPS & ~13% more in FCF per share

Using Benjamin Graham’s 2G rule of thumb, $MCD has to grow earnings at a 11.05% CAGR over the next several years to justify its valuation

Today, analysts anticipate 2024 - 2025 EPS growth over the next few years to be below the (11.05%) required growth rate

However, this may not be a problem as we’ll see below:

2023E $11.80 (16.8% YoY) FY Dec*

2024E: $12.47 (5.6% YoY)
2025E: $13.53 (8.5% YoY)

$MCD has a good track record of meeting analyst estimates 2 years out so let’s still assume $MCD ends 2025 with $13.53 in EPS & see its CAGR potential assuming different multiples

24x P/E: $324.72💵 … ~11.7% CAGR

22x P/E: $297.66💵 … ~7.2% CAGR

20x P/E: $270.60💵 … ~2.5% CAGR

As you can see, $MCD appears to be trading at a fair valuation relative to growth

However it appears that last month (when $MCD shares traded for $248) was the [...]

most opportune time to buy shares

At $248, assuming 22x multiple, $MCD CAGR potential was ~11.6%

That’s pretty attractive (and a reasonable assumption) for a stable & quality business like $MCD that is also a real estate company

So, although I’m not a buyer today, I’d consider $MCD closer to $245💵

Thanks @alexmerax for the request 👌🏽

If you have a valuation request, feel free to comment below👇🏽

#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 𝐚𝐬 𝐭𝐨 𝐜𝐨𝐦𝐩𝐥𝐞𝐭𝐞𝐧𝐞𝐬𝐬 𝐨𝐫 𝐚𝐜𝐜𝐮𝐫𝐚𝐜𝐲. "- Dimitry Nakhla | Babylon Capital®
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⁠Brandon Beylo
One of my favorite Stanley Druckenmiller quotes.

“People always forget that 50% of a stock’s move is the overall market, 30% is the industry, and maybe 20% from stock picking.” https://t.co/A9NdU1Wsd2
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⁠Brandon Beylo
RT @dailydirtnap: That's why it's a waste of time to get hung up on the 20% digging through Ks and Qs.

You can get 80% of it right with 5% of the work.

One of my favorite Stanley Druckenmiller quotes.

“People always forget that 50% of a stock’s move is the overall market, 30% is the industry, and maybe 20% from stock picking.” https://t.co/A9NdU1Wsd2 - Brandon Beylo
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⁠Invest In Assets 📈
LVMH -5% after Q2 Earnings 👜

• Revenue +2%
• Wines & Spirit -9%
• Fashion & Leather Goods +1%
• Perfumes & Cosmetics +6%
• Watches & Jewelry -3%
• Other activities +8% https://t.co/28xdIBZSDD
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⁠Invest In Assets 📈
Google is up 2% after its Q2 earnings

• Revenue +14% YoY (+15% CC)
• EBIT +25.5%
• Op. margin 29% —> 32%
• Earnings per share +31.25%

Strong quarter for Cloud, search & Youtube ads 💎 https://t.co/wXgpsbaxVo
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