Market Talk, November 14th 2021
Market Talk is a free Sunday issue, where I share a curation of the best things I have consumed during the week.
Each Sunday I will share:
• The greatest articles I have read during the week
• The best pieces of company-related insights I have consumed over the week
• One stellar podcast or interview
This week I intend to share some ‘Thoughts from the Quarter’ for Pinterest this coming Monday. Followed by some commentary on Kura Sushi’s record fourth quarter and impressive 2022 guidance.
If time permits, I will also be sharing a third report on Starbuck’s third quarter. In the schedule of ‘Thoughts from the Quarter’ I still have Google, Etsy, Square, IAC, Redfin, PayPal, PLBY Group, Lululemon, and Sea Limited. Following that, earnings season is over for me, and the variety of content will shift more so into more creative avenues, as well as the next Company Spotlight issue.
📈 Market Action 📉
Here are your quick updates from the past week for various asset classes.
The S&P 500
Sectoral ETFs for the US
🌎 Global Indices 🌎
Europe & UK
💷 Major Currencies 💷
FX rates are correct as of the time of publishing.
🔇 US Market Sentiment 🔇
Fear & Greed Index
The CNN Greed and Fear Index measures market sentiment based on seven factors; momentum, price strength, price breadth, put/call ratios, junk bond demand, volatility, and safe-haven demand.
The current reading stands at 83 down slightly from 85 last week.
The CBOE VIX stands at 16.28, down from 16.48 the week before.
Major Earnings for the Coming Week
Some of the major earnings for the upcoming week, compiled by Fincredible.
Articles of the Week
Here is a shortlist of a few interesting pieces that I have read over the course of the week, to feed your mind.
Note, these articles are not numerically listed in order of perceived value.
To access the suggested article, click the purple link after the source subheading.
1) Flaws You Can Live With and a Framework for Decision Making
Length: Moderate Read
Source: (Saber Capital Management)
In this piece, John Huber opens the dialogue with a borrowed Analogy from Annie Duke’s ‘Thinking in Bets’. See the below quotation.
The framing of investors sometimes falling prey to unlucky outcomes for rational bets leads Huber into a discussion surrounding his own investment decisions over the years. Seeking to find the link between outcomes and inputs. This leads him into a dissection of his decision to sell Google in 2020. Something which he chalks up to be “a bad outcome (for me as a seller of the stock) but not necessarily a poor decision”.
“In chess, the superior player will always beat the inferior player unless the better player makes a mistake. There is always the correct move to make, and the correct move in every situation in the game is potentially knowable, and so chess is about pattern recognition — memorizing as many sequences as possible and then being able to draw on this library of potential moves during the game.
The best players have the deepest database of chess moves memorized and the best ability to access them quickly. Absent the very rare unforced mistake, an amateur has essentially no chance to beat a grandmaster who in some cases has as many as 100,000 different board configurations memorized (along with the correct move for each one).
However, life isn’t like chess, it’s like poker. In poker there are lots of uncertainties, an element of chance, and a changing set of variables that impact the outcome. The best poker player in the world can lose to an amateur (and often enough does) even without making any poor decisions, which is an outcome that would never happen in chess.
In other words, a poker player can make all the correct decisions during the game and still lose through bad luck.”
2) Nomad Investment Partnership Letter 2001-2014
Length: Dense Read
Source: (The IGY Foundation)
This is another one to lock away in your own repository of great investment memos. Something to slowly digest over time, and revisit on occasion too. The letters from Nick Sleep and Qais Zakaria during their tenure at the Nomad Investment Partnership are highly informative.
From inception (September 2001) to December 2013, the fund had delivered 20.8% (18.4% after fees) in annualised returns versus the MSCI World Index 6.5%. Meaning, that $1 invested into the partnership at the onset would have been worth $10.21 (pre-fees) versus $2.17 for the MSCI by the end of 2013.
The record speaks for more than I can say. So, I will simply suggest that this is a great resource to extract a plethora of learnings from.
“So, why did we close? With big decisions like that there is often a mixture of forces pushing and pulling: The direction of regulation was certainly irksome and the tools of regulation unnecessarily blunt but, also, we wanted to feel that we did not have to justify actions, and inactions, on an ongoing basis to a revolving door of interested parties. We also felt we had wrung all that we could out of the investment process and to continue would have been to rinse and repeat, as it were. After all, we had what we needed, just a few superb businesses and we were unlikely to sell any of those to fund the purchase of another cigar butt, Philippine cement company, were we? The pull was the prospect of independence and a new adventure, this time working out how to recycle the funds for others to benefit. We wound up at an age (mid 40s) when it forced us to build something new (you can’t sit on the beach forever) and, hopefully, we would live long enough to also see the consequences of our actions; we would have to eat our own cooking, as it were.”
3) Bill Miller: Lessons From The Legendary Value Investor
Length: Moderate Read
Source: (MacroOps Musings)
A concise, succinct, and informative overview of Bill Miller’s investment strategy from the folks over at MacroOps.
Over the course of this issue, they explore Miller’s strategy, how he looks at new ideas, his thoughts on the margin of safety and intrinsic business value, and dig down into the points that really matter.
“The amount of content written, produced and recorded on Miller is astounding. The goal of this piece is to strip everything down. Curate the first principle ideas that make Miller one of value investing’s sharpest practitioners. Then, provide ideas on how to use such ideas in our own process.
There’s three things that distinguish Miller as one of the greatest:
Laser focus on free cash flow
Disregard for Investing Labels
Buying at low expectation inflection points and holding on
Before we can discuss what makes Miller one of the best, we should understand the basics of his investment approach.”
4) What Makes A Great Investor?
Length: Light Read
Source: (Woodlock House)
Chris Mayer discusses his largest position, Topicus, which was the resulting spin-off from Constellation late last year, which he feels has a “good shot of being a 5-10 bagger over the next decade”. After a fairly exorbitant run-up in share price, the discussion is framed around whether or not one sells or trims.
Mayer then dives into that theme, outlining the various tax implications, reinvestment risks, and execution risk that comes with selling portions of winning positions.
The conversation then flows into the attributing factors in determining the evaluation of a successful money manager, and which of those factors lead to a “great investor”.
“As a general rule, I don’t trim. I let the portfolio get undiversified and unbalanced, which is a natural outcome of a healthy long-term orientation, in my view. Over time, certain positions are just going to get big. I think this is one of the paths to generating great overall returns in a portfolio. It’s the path I’ve chosen to follow.”
Other Items I Read This Week
Note: ($) indicates there is a paywall on this content.
• Whoisnnamdi: Companies Rarely Grow Into Their Valuations
• AdventuresInCapitalism: On Maxing Out Positions
• AWealthofCommonSense: Some Thoughts on the Highest Inflation Rate in 30 Years
• Baillie Gifford: Digital Payment platforms pave way to a cashless future
• Matthew Ball: Framework for the Metaverse
🕵️ Company Insight 🕵️
• The Science of Hitting (MVRS): The Next Platform ($)
• Ensemble Capital (LSTR): Landstar: Truck Driving In a Box
• Musings on Markets (TSLA): Tesla's Trillion-Dollar Moment: A Valuation Revisit
• The Generalist (DISCORD): Discord: Imagine a Place
• Stratechery (MSFT): Microsoft and the Metaverse
Podcast of the Week
There is a huge range of Podcasts to listen to, and the choice can feel quite saturated at times. Here, I will share one podcast I listened to during the week, that I feel is worth your time.
Special Edition: Equity Investing with Conor MacNeil
Saxo Market Call
I decided to make this week’s podcast a tad self-promotional (sorry). The rationale being that appearing on Saxo’s podcast was a big deal for me, and a humbling experience, as someone who has listened to the daily Saxo Market Call for years.
Peter Garnry, Head of Equity and Quantitative Strategies at Saxo Bank, kindly hosted me on Thursday to discuss some of my background, the beginnings of Investment Talk, the independent research industry, my investment process, as well as some discussion on PLBY Group and MatchGroup.
I hope you will enjoy listening.
Host: Peter Garnry
Guest: Conor MacNeil (Me, lol)
Thank you for reading Market Talk and have a great week,
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