⁠Quiver Quantitative
Last month, a bill that would ban congressional stock trading was advanced in the Senate.

Since then, we have caught 9 different members of Congress violating the STOCK Act.

I believe that this sets a record for the most politicians breaking the law in a month. https://t.co/sg2ZTZw4AA
tweet

⁠Librarian Capital
"Former Chief Risk & Compliance Officer at Credit Suisse has joined Starling's Industry & Regulatory Advisory Board" (Linkedin)

In finance, brand name / credentialsing is more important than real track record?

Lehman's Chief Risk Officer in 2002-7 became World Bank's Treasurer

Finance is the land of second chances.

This was on LinkedIn today:

Stephen J. Scott Founder & CEO, Starling

I was delighted to announce this morning that Lara Warner, former Chief Risk & Compliance Officer at Credit Suisse, has joined Starling's Industry & Regulatory Advisory Board.

“I am excited to join Starling because they are working to address pervasive and unsolved risk challenges in a smart and novel way,” Lara said in connection with this morning's announcement. “The most significant losses firms face today typically stem from so-called ‘non-financial risks.’ But while we have robust metrics to guide us in managing the whole gamut of financial risks — credit risk, counter-party risk, etc. — when it comes to risks that flow from organizational culture, and the conduct that it permits or promotes, we’re still relying on ‘management intuition’ or blunt instruments better suited to the pre-digital era,” Lara added.

“Experience teaches me that, at the end of the day, non-financial risks are in fact financial risks, and Starling is advancing non-financial risk governance to meet the demands of today’s C-suite executives, boards, shareholders, and regulators,” she added. “The bank failures of 2023 make plain just how important this work is — for the industry and its overseers alike.”

I can’t overstate how grateful I am to have Lara’s guidance as we develop quantitative tools and data-driven methods to help leaders navigate some of the most persistent qualitative challenges in risk governance and supervision.

It’s hard to imagine someone better placed to help steer us as we develop practical solutions to real-world problems. Given the experience of Spring 2023, Lara knows better than most how – and why – our current risk governance toolset is failing the industry. Who better to help craft a new approach that’s fit-for-purpose? - John_Hempton
tweet

⁠Dimitry Nakhla | Babylon Capital®
Michael Burry’s updated Q2 2024 13F (Dataroma)

Top 5 holdings: $BABA $FOUR $MOH $BIDU & $JD

#stocks #investing https://t.co/hWfZDYKz9r
tweet

⁠Librarian Capital
How important is Android to $GOOG?

In financial terms, $AAPL Safari default payments imply ad revenues there were ~$56bn in 2022, ~1/3 of Search or ~1/4 of Google Ad

iOS users are fewer but richer, so Android likely similar order of magnitude

Value of data is harder to guess

Alphabet $GOOG paid $20bn to Apple $AAPL in 2022 to be default search on Safari in 36% revenue share

This implies GOOG ad revenues on Safari was $56bn, which compares with revenues of:

Google Advertising: $224bn
o/w Search & Other: $162bn
(YouTube was $29bn; Network was $33bn) https://t.co/XMRSKX9EwN - Librarian Capital
tweet

⁠Quiver Quantitative
🚨 Michael Burry just filed a portfolio update.

One move stood out to me:

Burry bought stock in a tiny biotech company called Bioatla, $BCAB.

The company is developing therapeutics for the treatment of solid tumor cancers.

Full list of moves is up on Quiver. https://t.co/NB6rymcFDy
tweet

⁠Stock Analysis Compilation
Matrix Asset Advisors on Lowe’s $LOW US

Thesis: Lowe’s is attractively valued, with a strong market position and a history of growth, making it a solid investment in the home improvement sector

(Extract from their Q2 letter) https://t.co/CJ9ixMO1O2
tweet

⁠Dimitry Nakhla | Babylon Capital®
Warren Buffett & Berkshire Hathaway Buy $ULTA

Just yesterday I shared my analysis suggesting $ULTA is undervalued & a good investment consideration

#stocks #investing https://t.co/x5XDaAYAGy

A sober valuation analysis on $ULTA 🧘🏽‍♂️

•NTM P/E Ratio: 12.20x
•5-Year Mean: 21.99x

•NTM FCF Yield: 7.62%
•5-Year Mean: 4.50%

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

Going forward, investors can receive ~80% MORE in earnings per share & ~69% MORE in FCF per share 🧠***

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

BALANCE SHEET✅
•Cash & Short-Term Inv: $524.60M
•Long-Term Debt: $0

$ULTA has an excellent balance sheet

RETURN ON CAPITAL✅
•2020: 22.9%
•2021: 8.9%
•2022: 37.9%
•2023: 41.8%
•2024: 39.2%

RETURN ON EQUITY✅
•2020: 37.9%
•2021: 9.0%
•2022: 55.8%
•2023: 71.1%
•2024: 60.9%

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

REVENUES✅
•2019: $6.72
•2024: $11.21B
•CAGR: 10.77%

FREE CASH FLOW✅
•2014: $636.73M
•2024: $1.04B
•CAGR: 10.33%

NORMALIZED EPS✅
•2019: $10.94
•2024: $26.03
•CAGR: 18.92%

SHARE BUYBACKS✅
•2014 Shares Outstanding: 64.46M
•LTM Shares Outstanding: 49.07M

By reducing its shares outstanding ~23.8%, $ULTA increased its EPS by ~31.3% (assuming 0 growth)

MARGINS✅
•LTM Gross Margins: 42.7%
•LTM Operating Margins: 14.5%
•LTM Net Income Margins: 11.1%

***NOW TO VALUATION 🧠

As stated above, investors can expect to receive ~80% MORE in EPS & ~69% MORE in FCF per share

Using Benjamin Graham’s 2G rule of thumb, $ULTA has to grow earnings at an 6.10% CAGR over the next several years to justify its valuation

Today, analysts anticipate 2025 - 2027 EPS growth over next few years to be at the (6.10%) required growth rate:

2025E: $25.68 (-1.3% YoY) *FY Jan
2026E: $28.19 (9.8% YoY)
2027E: $31.12 (10.4% YoY)

$ULTA has a good track record of meeting analyst estimates ~2 years out, so let’s assume $ULTA ends 2027 with $31.12 in EPS & see its CAGR potential assuming different multiples

17x P/E: $529.04💵 … ~22.3% CAGR

16x P/E: $497.92💵 … ~19.4% CAGR

15x P/E: $466.80💵 … ~16.3% CAGR

14x P/E: $435.68💵 … ~13.1% CAGR

13x P/E: $404.56💵 … ~9.8% CAGR

As you can see, $ULTA appears to have attractive return potential if we assume it trades 14x earnings (a reasonable assumption)

However, the 🔑 here is that $ULTA multiple needs to expand from the current NTM P/E of 12.20x

$ULTA growth rate slowed down significantly, however share buybacks (especially at current levels) can be very accretive & lead to some EPS growth

Multiples can compress when growth expectations aren’t met, & multiples can expand when growth expectations are exceeded, among other things

$ULTA will likely trade at a higher multiple IF growth returns — this is the leap of faith investors would need to take to invest in $ULTA

Given its record, return metrics, exceptional balance sheet, & strong consumer loyalty (42M members in loyalty program & over 95% of sales funnel through its loyalty program), I believe the odds are in $ULTA favor

Today at $320💵 $ULTA appears to be a good consideration for investment* (*not a “forever buy & hold”)

#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 𝐚𝐜𝐜𝐮𝐫𝐚𝐜𝐲. - Dimitry Nakhla | Babylon Capital®
tweet