Offshore
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โ Investing visuals
Investing 101: mistakes than can cost you a lot๐Ÿ’ธ https://t.co/VBSmJ2R5fh
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Offshore
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โ Stock Analysis Compilation
Hotchkis & Wiley on General Motors $GM US

Thesis: GMโ€™s strong market position, attractive valuation, and commitment to shareholder returns make it a compelling buy

(Extract from their Q3 letter) https://t.co/VdLc9u0qSj
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โ Ahmad Jivraj
Investing rewards people who (mostly) do nothing.

As @MohnishPabrai says, "good investing is like watching paint dry"
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Offshore
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โ Hidden Value Gems
A long read in @WSJ on John Elkann's and his latest steps at $STLA. Not saying much really.

"Honestly guys, what we really need to do is sell cars. Thatโ€™s what weโ€™re good at", - [John Elkann] said at the Michigan meeting this week. https://t.co/jABMTnRdvK
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Offshore
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โ Stock Analysis Compilation
Liontrust on Interpump $IP IM

Thesis: Interpumpโ€™s efficiency-focused solutions and discounted valuation position it well for long-term industrial growth

(Extract from their Q3 letter) https://t.co/sRPGPxmaiE
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Offshore
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โ Stock Analysis Compilation
Loomis Sayles on Novo Nordisk $NOVO B DC

Thesis: Novoโ€™s leadership in GLP-1 innovation positions it for sustained growth in the obesity treatment market

(Extract from their Q3 letter) https://t.co/R95SupfnjK
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Offshore
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โ Startup Archive
Perplexity founder Aravind Srinivas explains the โ€œuser is never wrongโ€ philosophy of Larry Page

Aravind recounts a story of Larry Pageโ€™s meeting with the CEO of Excite. Excite was the #2 search engine behind Yahoo at the time, and they were interested in buying Google. The two CEOs compared the search results of their products side-by-side.

When Googleโ€™s results were clearly better, Exciteโ€™s CEO tried to excuse his productโ€™s performance: โ€œIf you typed the query this way, it wouldโ€™ve worked.โ€

Aravind believes this is an important difference in philosophy between Google and Excite. Larry Page believed that a search engine should give high quality answers regardless of what the user typed:

โ€œYou do all the magic behind the scenes so that even if the user was lazy, even if there were typosโ€ฆ they still got the answer and they love the product.โ€

Today Google dominates search, and most people have never heard of Excite.

Aravind believes the best AI products will adopt this same philosophy and that โ€œprompt engineeringโ€ wonโ€™t be a long-term thing.

โ€œI think you want to make products work where a user doesnโ€™t even ask for something. You know that they want it and you give it to themโ€ฆ People are lazy and a better product should be one that allows you to be more lazy, not less. Products need to have some magic to them, and the magic comes from letting you be more lazy.โ€

Video source: @lexfridman (2024)
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โ Ahmad Jivraj
Personal growth is often miserable.
If you want progress, get used to pain.
In investing, this means getting used to drawdowns.
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Offshore
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โ Stock Analysis Compilation
Artisan Partners on Nike $NKE US

Thesis: Nikeโ€™s innovation pipeline and restructuring efforts could unlock significant upside potential for investors

(Extract from their Q3 letter) https://t.co/tzx1AzIl7k
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โ Dimitry Nakhla | Babylon Capitalยฎ
A quality valuation analysis on $AMD ๐Ÿง˜๐Ÿฝโ€โ™‚๏ธ

โ€ขNTM P/E Ratio: 30.59x
โ€ข3-Year Mean: 32.10x

โ€ขNTM FCF Yield: 2.97%
โ€ข3-Year Mean: 3.10%

As you can see, $AMD appears to be trading near fair value

Going forward, investors can receive ~5% MORE in earnings per share & ~4% LESS in FCF per share ๐Ÿง ***

Before we get into valuation, letโ€™s take a look at why $AMD is a good business

BALANCE SHEETโœ…
โ€ขCash & Short-Term Inv: $4.54B
โ€ขLong-Term Debt: $1.72B

$PYPL has an excellent balance sheet, an A- S&P Credit Rating, & 21x FFO Interest Coverage

RETURN ON CAPITALโœ…โžก๏ธโŒ
โ€ข2019: 17.9%
โ€ข2020: 21.5%
โ€ข2021: 44.7%
โ€ข2022: 2.1%
โ€ข2023: 0.7%
โ€ขLTM: 2.3%

RETURN ON EQUITYโœ…โžก๏ธโŒ*
โ€ข2019: 16.7%
โ€ข2020: 57.5%
โ€ข2021: 47.4%
โ€ข2022: 4.2%
โ€ข2023: 1.5%
โ€ขLTM: 3.3%

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

*the notable drop in ROIC can be attributed to Xilinx acquisition in 2022, increased expenses and investments, among other things

REVENUESโœ…
โ€ข2018: $6.48B
โ€ข2023: $22.68B
โ€ขCAGR: 28.47%

FREE CASH FLOWโŒโžก๏ธโœ…
โ€ข2018: ($0.13B)
โ€ข2023: $1.12B

*2024E FCF is $3.68B ๐Ÿ“ˆ

NORMALIZED EPSโœ…
โ€ข2018: $0.46
โ€ข2023: $2.65
โ€ขCAGR: 41.93%

SHARE BUYBACKSโŒ
โ€ข2018 Shares Outstanding: 1.06B
โ€ขLTM Shares Outstanding: 1.64B

By increasing its shares outstanding by 54%, $AMD decreased its EPS by 35% (assuming 0 growth)

MARGINS๐Ÿ†—
โ€ขLTM Gross Margins: 52.1%
โ€ขLTM Operating Margins: 5.6%
โ€ขLTM Net Income Margins: 7.5%

***NOW TO VALUATION ๐Ÿง 

As stated above, investors can expect to receive ~5% MORE in EPS & ~4% LESS in FCF per share

Using Benjamin Grahamโ€™s 2G rule of thumb, $AMD has to grow earnings at a 15.30% CAGR over the next several years to justify its valuation

Today, analysts anticipate 2025 - 2027 EPS growth over the next few years to be greater than the (15.30%) required growth rate:

2024E: $3.32 (25.5% YoY) *FY Dec

2025E: $5.11 (53.8% YoY)
2026E: $7.10 (38.9% YoY)
2027E*: $9.11 (28.2% YoY)

$AMD has a mediocre track record of meeting analyst estimates ~2 years out, so letโ€™s assume $AMD ends 2027 with $8.20* in EPS (10% below estimates) & see its CAGR potential assuming different multiples

26x P/E: $213.20๐Ÿ’ต โ€ฆ ~15.0% CAGR

24x P/E: $196.80๐Ÿ’ต โ€ฆ ~12.1% CAGR

22x P/E: $180.40๐Ÿ’ต โ€ฆ ~8.9% CAGR

20x P/E: $164.00๐Ÿ’ต โ€ฆ ~5.7% CAGR

As you can see, $AMD appears to have attractive return potential if we assume >24x earnings & aggressive return potential if we assume >26x earnings

Assuming 24x is very reasonable given $AMD growth rate โ€” however this is a high degree of uncertainty when it comes to $AMD multi-year projections (for better or for worse)

Today at $138๐Ÿ’ต $AMD still appears to be a decent consideration for investment

To account for the high uncertainty and aggressive growth projections, I would require a more substantial margin of safety

Iโ€™d consider $AMD a strong consideration closer to $120๐Ÿ’ต (~13.5% below todayโ€™s price) or at ~26.50x NTM estimates, where I can expect ~14% CAGR assuming 22x

#stocks #investing
___

๐ƒ๐ˆ๐’๐‚๐‹๐Ž๐’๐”๐‘๐„โ€ผ๏ธ: ๐“๐ก๐ข๐ฌ ๐ข๐ฌ ๐๐Ž๐“ ๐ˆ๐ง๐ฏ๐ž๐ฌ๐ญ๐ฆ๐ž๐ง๐ญ ๐€๐๐ฏ๐ข๐œ๐ž. ๐๐š๐›๐ฒ๐ฅ๐จ๐ง ๐‚๐š๐ฉ๐ข๐ญ๐š๐ฅยฎ ๐š๐ง๐ ๐ข๐ญ๐ฌ ๐ซ๐ž๐ฉ๐ซ๐ž๐ฌ๐ž๐ง๐ญ๐š๐ญ๐ข๐ฏ๐ž๐ฌ ๐ฆ๐š๐ฒ ๐ก๐š๐ฏ๐ž ๐ฉ๐จ๐ฌ๐ข๐ญ๐ข๐จ๐ง๐ฌ ๐ข๐ง ๐ญ๐ก๐ž ๐ฌ๐ž๐œ๐ฎ๐ซ๐ข๐ญ๐ข๐ž๐ฌ ๐๐ข๐ฌ๐œ๐ฎ๐ฌ๐ฌ๐ž๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐ž๐ž๐ญ.

๐“๐ก๐ž ๐ข๐ง๐Ÿ๐จ๐ซ๐ฆ๐š๐ญ๐ข๐จ๐ง ๐œ๐จ๐ง๐ญ๐š๐ข๐ง๐ž๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐ž๐ž๐ญ ๐ข๐ฌ ๐ข๐ง๐ญ๐ž๐ง๐๐ž๐ ๐Ÿ๐จ๐ซ ๐ข๐ง๐Ÿ๐จ๐ซ๐ฆ๐š๐ญ๐ข๐จ๐ง๐š๐ฅ ๐ฉ๐ฎ๐ซ๐ฉ๐จ๐ฌ๐ž๐ฌ ๐จ๐ง๐ฅ๐ฒ ๐š๐ง๐ ๐ฌ๐ก๐จ๐ฎ๐ฅ๐ ๐ง๐จ๐ญ ๐›๐ž ๐œ๐จ๐ง๐ฌ๐ญ๐ซ๐ฎ๐ž๐ ๐š๐ฌ ๐ข๐ง๐ฏ๐ž๐ฌ๐ญ๐ฆ๐ž๐ง๐ญ ๐š๐๐ฏ๐ข๐œ๐ž ๐ญ๐จ ๐ฆ๐ž๐ž๐ญ ๐ญ๐ก๐ž ๐ฌ๐ฉ๐ž๐œ๐ข๐Ÿ๐ข๐œ ๐ง๐ž๐ž๐๐ฌ ๐จ๐Ÿ ๐š๐ง๐ฒ ๐ข๐ง๐๐ข๐ฏ๐ข๐๐ฎ๐š๐ฅ ๐จ๐ซ ๐ฌ๐ข๐ญ๐ฎ๐š๐ญ๐ข๐จ๐ง. ๐๐š๐ฌ๐ญ ๐ฉ๐ž๐ซ๐Ÿ๐จ๐ซ๐ฆ๐š๐ง๐œ๐ž ๐ข๐ฌ ๐ง๐จ ๐ ๐ฎ๐š๐ซ๐š๐ง๐ญ๐ž๐ž ๐จ๐Ÿ ๐Ÿ๐ฎ๐ญ๐ฎ๐ซ๐ž ๐ซ๐ž๐ฌ๐ฎ๐ฅ๐ญ๐ฌ.

๐ˆ๐ง๐Ÿ๐จ๐ซ๐ฆ๐š๐ญ๐ข๐จ๐ง ๐œ๐จ๐ง๐ญ๐š๐ข๐ง๐ž๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐ž๐ž๐ญ ๐ก๐š๐ฌ ๐›๐ž๐ž๐ง ๐จ๐›๐ญ๐š๐ข๐ง๐ž๐ ๐Ÿ๐ซ๐จ๐ฆ ๐ฌ๐จ๐ฎ๐ซ๐œ๐ž๐ฌ ๐›๐ž๐ฅ๐ข๐ž๐ฏ๐ž๐ ๐ญ๐จ ๐›๐ž ๐ซ๐ž๐ฅ๐ข๐š๐›๐ฅ๐ž, ๐›๐ฎ๐ญ ๐ข๐ฌ ๐ง๐จ๐ญ ๐ ๐ฎ๐š๐ซ๐š๐ง๐ญ๐ž๐ž๐ ๐š๐ฌ ๐ญ๐จ ๐œ๐จ๐ฆ๐ฉ๐ฅ๐ž๐ญ๐ž๐ง๐ž๐ฌ๐ฌ ๐จ๐ซ ๐š๐œ๐œ๐ฎ๐ซ๐š๐œ๐ฒ.
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