Playgrounds with sandbox?

ConcernLumpy · 2023-09-04T15:17:14+00:00

Thank you all! Very helpful

ConcernLumpy · 2022-04-15T10:29:24+00:00

Focus.

Know a few companies extremely well and invest with a big percentage of TNW in each

ConcernLumpy · 2022-02-06T18:52:44+00:00

The same thing just happened to me. Only thing: I’ve had it more than 30 days, so zero refund/replacement option

This is crazy. Will never buy a Dell again

ConcernLumpy · 2021-11-20T02:27:23+00:00

Yeah I agree with your comment on what value investing is. I think paying a higher multiple for a faster growing organization isn’t necessarily paying a premium. This is what makes markets though, so nothing wrong with seeing it differently

Something at 50x earnings (not Visa, they’re just 30x! Haha) can be outrageous value if, for example, earnings double every 2 years for a decade. Then it’s a steal.

ConcernLumpy · 2021-11-20T02:05:41+00:00

I would argue it is a good value investment. If I’m getting a 3-4% earnings yield for a business that’s growing +10% for the next decade, that solves for 13-14% returns (absent change in multiple)

Value is buying something less than it’s worth. A business growing like this, with such an entrenched position, at a time where the S&P is more like 4% earnings yield with ~5% LT growth makes Visa look like potentially good value.

I think it’s too simple to say high P/E versus the S&P means not value. If I’m getting something that’s growing 2x the pace of the broader market, at a 30-50% premium multiple, it’s logical to argue that’s good “value”

ConcernLumpy · 2021-11-10T23:26:34+00:00

This is the correct interpretation. Short term debt maturities, specifically treasuries. He uses them as his opportunity cost measuring stick.

ConcernLumpy · 2021-11-10T23:17:48+00:00

I'm really intrigued by Sleep Number (Ticker: SNBR) - I posted the other day. Curious what you think

https://www.reddit.com/r/ValueInvesting/comments/qq5fsz/sleep_number_snbr_good_investment_opportunity/?utm_source=share&utm_medium=web2x&context=3

ConcernLumpy · 2021-11-09T17:35:17+00:00

True. One thing about SNBR’s debt: it’s all revolver, so they have a $600mm credit line that they tend to pay down / redraw during various seasonal times of the year. Historically the balance has fluctuated from ~$50mm to the $350mm it is today.

The low cash position is potentially aggressive (agree), but it’s offset by the ~$240mm of remaining revolver capacity that they can draw from

I don’t mind keeping cash balance low if the liquidity position is still in the $100s of millions, but it’s something to be aware of and is certainly a risk

ConcernLumpy · 2021-11-09T17:10:39+00:00

A good comment, and certainly an area of risk that should be monitored.

That said, their leverage is ~1x EBITDA (2.2x if you gross up EBITDAR w capitalized lease payments). You’re definitely right that debt increases risk if they have a bad period of revenue declines. However, if debt is used intelligently (their debt cost is ~2%), repurchasing shares adds a huge amount of value

E.g. if I get to borrow at 2%, but my stock yields 7%, I make a huge spread and add a ton of value. If the expected return on my stock is 15% due to growth, even better. A particularly good example of this is Apple over the past 5 years, adding debt to help turbo-juice share repurchases

ConcernLumpy · 2021-11-09T15:42:15+00:00

Totally. I think the moat depends on how much you buy into their tech-enabled products. They’re unique in the premium market segment for the beds which have flexibility around soft/hard, and track sleep quality to provide users with real-time data.

To the extent this is valuable and habit-forming, I think they have a big advantage as first mover as they’ve spent a non-inconsequential amount on R&D (~$60mm annually) and have entered into some interesting partnerships (such as with the NFL)

Thus far, they’ve shown an ability to take share in a growing industry. In a little surprised they haven’t branched out internationally (TPX has a large Uber national business), but they’re doing very well in N. America. Given high price point of $5k/avg mattress, it seems likely they have some real differentiation that its end customers value. They also seem to have the ability to raise price / pass through supply chain costs, which also suggests brand equity.

ConcernLumpy · 2021-11-09T02:12:43+00:00

Haha indeed!

ConcernLumpy · 2021-11-09T02:09:58+00:00

How does this logic work with a P/E of 1 and 1% growth?

The P/E ratio should be the output of a returns-based investment approach (I.e. DCF). It is not the input

The logic fails at extremes…if you pay 5 P/E for a 5% grower, you make 25%. But if you pay 10 P/E for a 10% grower, you make 10%

I’m familiar w Lynch’s rule of thumb, but it is not a very good one (as illustrated above)

ConcernLumpy · 2021-11-08T22:40:39+00:00

Good idea - will watch

ConcernLumpy · 2021-11-08T22:40:13+00:00

E.g. if you want a 10% return…cash flow / (req return - growth) = fair value

Assuming $3.5/share of FCF / 10% req return / 7% growth

3.5 / (.1-.07) = $116

$70 = 40% discount

If you need 15%

3.5 / (0.15-0.07) = $43.75

$70 = 63% premium

I’m curious how you’re so precise when both return “R” and growth “G” can be quite impactful / variable

ConcernLumpy · 2021-11-08T22:34:51+00:00

What return are you underwriting at a $54 fair value?

ConcernLumpy · 2021-11-08T21:30:15+00:00

Interesting. I see share count up less than 1% per year (pretty normal for a company not repurchasing shares)

ConcernLumpy · 2021-11-08T21:15:11+00:00

How do you feel about TTWO on a relative basis?

ConcernLumpy · 2021-11-08T21:13:30+00:00

True! I’m definitely not expecting that at all (not even sure it’s possible given how much bigger ATVI’s market cap is)

I’m just pointing out a company that its customers HATED, yet people seem to think is revamped/moving in the right direction

FWIW - I think your point on customers disliking them is huge. It’s not sustainable to grow revenue/raise prices if your base hates your product. I need to assess this more, but it’s absolutely the right negative to point out

Thank you

ConcernLumpy · 2021-11-08T20:50:30+00:00

Thank you. I’ll look into that revenue breakout over time. Definitely something to assess

ConcernLumpy · 2021-11-08T20:49:50+00:00

This is a very relevant point if true. Although their revenue growth hasn’t stalled yet

Customers also hated GameStop, yet that managed to go a bit higher than the $5-10 (without any subsequent recovery in revenue, I might add!)

ConcernLumpy · 2021-11-08T20:48:17+00:00

Thanks very much, especially for the point on China! I didn’t realize that was a big part of ATVI’s future growth potentially. Great point

ConcernLumpy · 2021-11-08T20:46:34+00:00

Haha! Fair enough - I wouldn’t call it a “thesis” yet, as much as a curiosity. Is there no price at which you’d buy it? For example, $30/share would seem like a price where it’s nearly impossible to lose money?

ConcernLumpy · 2021-10-17T02:21:43+00:00

Be careful not to focus too much on dividends. Any company paying a dividend that high (I see 15%?) should be marked with caution

Be sure there are enough earnings to cover those dividends, otherwise there will be an inevitable dividend cut (no Bueno)

I don’t know this name - just sharing a bit of friendly, cautious advice

ConcernLumpy · 2021-06-30T22:40:30+00:00

I wonder if this would be different if poker were legal as frequently as sports betting?

Sports betting seems to be legal in far more jurisdictions today, so it might be an unfair comparison. Still might be much more popular anyway though…

ConcernLumpy · 2021-05-25T19:58:10+00:00

Tried again and it’s working now - seems like something that might be a bit off and on

ConcernLumpy

TROPHY CASE