I wish I had spent more time analyzing Amazon in earnest years ago. But late is better than never. I’ll console myself with the fact that e-commerce penetration in the US is still <10% of all retail sales…and relative to that statistic, even the word “late” seems a bit premature. Having spent a number of … Continue reading Supply Side Advantages of Fulfillment (by Amazon)
For almost a decade, Bitcoin has periodically captured the attention of the public. Sometimes for its technological potential, sometimes as an object of ridicule, but often times for its boom / bust cycles that have fueled the limitless imaginations of speculators. Since the start of this year, Bitcoin and alt-coins have once again captured the … Continue reading The Bitcoin “Penny Stock”
Is possibly going to be Alibaba very soon. For a long while following it’s IPO in 2014, investors were highly skeptical of Alibaba. Many still are, but many more are starting to recognize Alibaba’s incredible dominance in China. More importantly, as mentioned briefly in my post Tencent vs Alibaba on the Quest to Go Global, the … Continue reading The World’s Most Valuable E-Commerce Company
Finally catching up on some reading: Bloomberg published an excellent profile on Tencent and the co’s strategist, Martin Lau. I highly recommend the article as it not only goes through the history of the company, but reveals the type of thinking and mentality that has helped Tencent become one of the most successful companies in … Continue reading Tencent vs Alibaba on the Quest to Go Global
Summer’s full swing has kept me away from this blog, but luckily it gave me some time to think more deeply about a number of ideas and topics. One of those is: What tempts us to go beyond our circle of competence? Buffett constantly warns investors against going outside their circle of competence since doing … Continue reading Temptations to Go Beyond Our Circle of Competence
An airport. Airports are natural monopolies. Who wouldn’t like owning a natural monopoly? And unlike other natural monopolies such as local utilities, airports tend to be higher growth assets (air travel is less penetrated than electricity). At a high level, airports receive revenues from 2 sources: 1) fees on passenger tickets, and 2) commercial revenues generated … Continue reading You Know What’s Better than Owning an Airline?
What would you pay for a well-regarded, branded business that is expected to grow revenues and net income around 10% CAGR for the next 3-5 years with industry leading margins, high returns on capital, and low capital intensity? And better yet, given that this business has low capital intensity, the company generates and distributes high free cash … Continue reading Pandora – Fast Fashion or Fad Fashion?
Do investment managers add any value? This question is clearly of interest to clients of asset managers, but it is also an increasingly important question for industry professionals as well. It’s hard for industry professionals to do good work if they do not believe in the work they do, and for clients, it is dangerous to … Continue reading Value Creation in the Investment Management Business
The last post, How Airlines Generate Float, compared the similarities between airline mile programs and insurance companies. I argued that airlines are now essentially generating float through their miles programs. Turns out it’s not that original of an idea (as much as I wish it was!) as there are at least two publicly-traded mile program managers in Brazil. Smiles One … Continue reading A Publicly-Traded Airline “Float” Company
Recently, I’ve been spending quite a bit of time pondering airlines. Perhaps out of concern that someone could violently drag me down United’s tiny aisles! Good thing I don’t fly United…but I kid, of course. What has caught my attention is Buffett. He now owns approximately $10 billion of airline stocks. And for anyone that has followed … Continue reading How Airlines Generate “Float”
Lately, there’s been no shortage of positive coverage on Amazon – and for good reasons. The vast majority of retail is struggling with declining same-store-sales, yet, Amazon continues to post a torrid pace of growth despite its size. In FY16, Amazon grew North America segment sales by 25%, and that growth came at the expense … Continue reading Amazon’s Capital Market Dependence
Judging from market multiples, it’s clear the market is skeptical of Apple’s ability to continue to succeed and has been for many years (currently, 1-yr forward P/E of ~15x despite recent re-rating), while holding limited concern for Google and Facebook (both 1-yr forward at ~26x). This concern is understandable given the ever-changing tech environment and … Continue reading What Apple, Google, and Facebook’s Business Models Tell Us About Their Ability to Adapt to the Coming AI-Future
“A further related lesson: Easy does it. After 25 years of buying and supervising a great variety of businesses, Charlie and I have not learned how to solve difficult business problems. What we have learned is to avoid them. To the extent we have been successful, it is because we concentrated on identifying one-foot hurdles that … Continue reading Simple Investment Theses
“Investment is most intelligent when it is most businesslike.” – Benjamin Graham “I am a better investor because I am a businessman and a better businessman because I am an investor.” – Warren Buffett Most investors define themselves along a couple of axes: Technical vs fundamental, value vs growth, long vs (and/or) short, contrarian vs momentum, … Continue reading The Importance of Focusing on Business Models
Over the last half century, Buffett has achieved a marvelous long-term performance record. Many have studied and written about his investments to try to learn how to replicate what he did. I’ve read a lot of those, and you probably have, too. But I’ve always felt that something was missing. Consensus has generally coalesced around a … Continue reading Berkshire’s Performance Edge that No One Talks About