The Acquirer's Multiple® https://acquirersmultiple.com Absurdly Simple, Ridiculously Powerful Deep Value Stock Screener Fri, 09 Dec 2022 09:11:08 +0000 en-US hourly 1 https://wordpress.org/?v=6.1.1 https://acquirersmultiple.com/wp-content/uploads/2015/06/rocketsquare_orange_175x175-100x100.png The Acquirer's Multiple® https://acquirersmultiple.com 32 32 This Week’s 10 Big Named Companies Near 52 Week Lows https://acquirersmultiple.com/2022/12/this-weeks-10-big-named-companies-near-52-week-lows-6/ https://acquirersmultiple.com/2022/12/this-weeks-10-big-named-companies-near-52-week-lows-6/#respond Fri, 09 Dec 2022 09:11:08 +0000 https://acquirersmultiple.com/?p=35655 Read More]]> Over the past twelve months a number of big named companies have been near or below their 52 week low price. Each week we’ll take a look at some of the biggest names currently close to their 52 week lows:

Symbol Name Price $ 52 Week Low $
AMZN Amazon.com Inc 88.46 85.87
TSLA Tesla Inc 174.04 166.19
CRM Salesforce Inc 130.48 130.02
MDT Medtronic PLC 76.91 75.83
TFC Truist Financial Corp 41.84 40.01
D Dominion Energy Inc 58 57.40
COF Capital One Financial Corp 93.23 90.27
MTB M&T Bank Corp 147.97 141.49
EQR Equity Residential 61.96 59.32
TSN Tyson Foods Inc 63.74 62.94

Here’s what they look like in one chart:

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Stock In Focus – TAM Stock Screener – Alphabet Inc (GOOGL) https://acquirersmultiple.com/2022/12/stock-in-focus-tam-stock-screener-alphabet-inc-googl-5/ https://acquirersmultiple.com/2022/12/stock-in-focus-tam-stock-screener-alphabet-inc-googl-5/#respond Fri, 09 Dec 2022 09:10:42 +0000 https://acquirersmultiple.com/?p=35570 Read More]]> As part of our ongoing series here at The Acquirer’s Multiple, we provide this feature article titled ‘Stock in Focus‘ where we focus on one of the stocks from our Stock Screeners.

One of the cheapest stocks in our Stock Screeners is:

Alphabet Inc (GOOGL)

Alphabet is a holding company. Internet media giant Google is a wholly owned subsidiary. Google generates 99% of Alphabet revenue, of which more than 85% is from online ads. Google’s other revenue is from sales of apps and content on Google Play and YouTube, as well as cloud service fees and other licensing revenue. Sales of hardware such as Chromebooks, the Pixel smartphone, and smart home products, which include Nest and Google Home, also contribute to other revenue. Alphabet’s moonshot investments are in its other bets segment, where it bets on technology to enhance health (Verily), faster internet access to homes (Google Fiber), self-driving cars (Waymo), and more. Alphabet’s operating margin has been 25%-30%, with Google at 30% and other bets operating at a loss.

A quick look at the share price history (below) over the past twelve months shows that the price is down 29%. Here’s why the company is undervalued.

GOOGL Chart

GOOGL data by YCharts

Summary

Market Cap: $1.309 Trillion

Enterprise Value: $1.223 Trillion

Operating Earnings

Operating Earnings: $77.07 Billion

Acquirer’s Multiple

Acquirer’s Multiple: 15.90

Free Cash Flow (TTM)

Free Cash Flow: $62.54 Billion

FCF/EV Yield %:

FCF/EV Yield: 4.77

Shareholder Yield %:

Shareholder Yield: 4.40

Other Indicators

F-Score: 6.00

Altman Z-Score: 9.732

ROA (5 Year Avge%): 22

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This Week’s 10 Worst Performing Mega-Cap Stocks Last 12 Months https://acquirersmultiple.com/2022/12/this-weeks-10-worst-performing-mega-cap-stocks-last-12-months-6/ https://acquirersmultiple.com/2022/12/this-weeks-10-worst-performing-mega-cap-stocks-last-12-months-6/#respond Fri, 09 Dec 2022 09:10:07 +0000 https://acquirersmultiple.com/?p=35654 Read More]]> Over the past twelve months ten Mega-Cap stocks have underperformed all others. Mega-Caps are defined by $200 Billion Market Cap or more. Here’s this week’s top 10 worst performing Mega-Caps in the last twelve months:

Symbol Name 1 Year Price Returns (Daily)
1. META Meta Platforms Inc -64.71%
2. TSLA Tesla Inc -50.36%
3. NVDA NVIDIA Corp -50.29%
4. AMZN Amazon.com Inc -49.79%
5. GOOGL Alphabet Inc -35.53%
6. MSFT Microsoft Corp -27.04%
7. BAC Bank of America Corp -26.77%
8. HD The Home Depot Inc -23.07%
9. JPM JPMorgan Chase & Co -19.11%
10. AAPL Apple Inc -17.67%

Here’s what they look like in one chart:

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This Week’s Best Value Investing News, Podcasts, Interviews (12/09/2022) https://acquirersmultiple.com/2022/12/this-weeks-best-value-investing-news-podcasts-interviews-12-09-2022/ https://acquirersmultiple.com/2022/12/this-weeks-best-value-investing-news-podcasts-interviews-12-09-2022/#respond Fri, 09 Dec 2022 09:09:35 +0000 https://acquirersmultiple.com/?p=35607 Read More]]> This week’s best investing news:

EXCLUSIVE: Master Investor Howard Marks Shares His Blunt Advice On Investing (Forbes)

Sudden Stops (Verdad)

Interview With Value Investor Bill Nygren of Oakmark Funds (Motley Fool)

100-Bagger (Woodlock)

How Warren Buffett Could Prevent a Breakup of Berkshire Hathaway After He Dies (Barron’s)

Lindsell Train – The Triumph of Experience Over Hope (Lindsell Train)

Walter J. Schloss: An Investor for All Seasons (Kingswell)

A Time for TIPS (Jason Zweig)

Deep Thoughts For Passive Investors (Felder)

Graham & Doddsville Newsletter Fall Edition (G&D)

Watching Them Grow (Humble Dollar)

Small Cap Silver Linings (First Eagle)

Cognitive Dissonance (Scott Galloway)

What’s Oaktree Reading? 2022 Year-End Book Recommendations (OakTree)

Jamie Dimon – Crypto is a complete sideshow, tokens are like ‘pet rocks (CNBC)

“Stop Losses Are Stupid” (All Star Charts)

EM Corporate Debt ESG Integration (GMO)

Apple Is Good, Even Better If Owned Via Berkshire Hathaway (SA)

Ken Fisher, Discusses What Rising US Debt Means for Markets (Fisher)

Jeffrey Gundlach at CNBC Financial Advisor Summit (CNBC)

Rainmakers: Bad Weather and Institutional Investor Performance (SSRN)

Transcript: Luis Berruga, Global X ETFs (Big Picture)

Leon Cooperman on finding winning stocks in a down market and a 2023 recession (CNBC)

Small-Cap Stocks Are Really Cheap (Morningstar)

Where Macro and Fundamental Analysis Meet (Dodge & Cox)

What if everything is going to be OK? (FT)

A Memo to Investors (Albert Bridge)


This week’s best value Investing news:

William Blair – Opportunities in Value Strategies (WB)

The Golden Era of Value Investing Is Back (Yahoo)

Morgan Stanley’s Wilson Sees Value Stocks at Risk in a Downturn (Bloomberg)


This week’s Fear & Greed Index:


This week’s best investing podcasts:

Episode #458: Bob Elliott, Unlimited Funds – A Macro Masterclass (Meb Faber)

Bob Robotti – Searching For Improving Industries (Business Brew)

Annie Duke on the Power of Quitting (EconTalk)

Is It All Over for Energy Bulls? (Real Vision)

TIP500: Berkshire Hathaway Shareholder’s Meeting and Intrinsic Value (TIP)

Behind The Memo: What Really Matters? (Howard Marks)

Nick Train on another challenging year for Finsbury Growth & Income (AJ Bell)

An Evidence-Based Approach to Markets with Larry Swedroe (Excess Returns)

Investing to Create a World You Would Like to Retire In (Barron’s)

China’s Plan to Decouple From the US Dollar (Hidden Forces)

Bill Lenehan: Investing in Commercial Real Estate (Invest Like The Best)

Believe it or not, the Aussie share market is up over the past 12 months (Equity Mates)

Should You Buy Dividend Stocks in a Recession? (Investing Insights)


This week’s Buffett Indicator:

Fairly Valued.


This week’s best investing research:

Investing in Deflation, Inflation, and Stagflation Regimes (AlphaArchitect)

Two Reasons We Like Bonds (All Star Charts)

The FTX Implosion (AllAboutAlpha)


This week’s best investing tweet:


This week’s best investing graphic:

Visualizing Tech Company Layoffs in 2022 (Visual Capitalist)

tech layoffs in 2022

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SBF And FTX GTFO https://acquirersmultiple.com/2022/12/sbf-and-ftx-gtfo/ https://acquirersmultiple.com/2022/12/sbf-and-ftx-gtfo/#respond Fri, 09 Dec 2022 09:09:11 +0000 https://acquirersmultiple.com/?p=35595 Read More]]>

In their latest episode of the VALUE: After Hours Podcast, Brewster, Taylor, and Carlisle discuss SBF And FTX GTFO. Here’s an excerpt from the episode:

Tobias: I didn’t really know who SBF was, this is Sam Bankman-Fried, and FTX. I didn’t know who this guy was probably three weeks ago. I didn’t really know. I didn’t really know what it did.

Jake: Didn’t know or didn’t care? What was that like? [laughs]

Tobias: Little bit of both. I didn’t really know, didn’t really care.

Jake: Okay.

Tobias: Now that he’s blown himself up and he’s got into the public eye, but I went and had a look at who he was, pretty unimpressive. But it’s amazing to see the mainstream media reporting on this thing. You would think that he’s been trying his hardest and he’s had a little stumble and it’s going to be terrible, because now he’s not going to be able to donate all of his money.

Jake: Yeah– [crosstalk]

Tobias: It’s not like there’s any fraud going on there.

Jake: Alleged fraud, but based on his own tweets, it sort of sounds he’s copped to taking money from the customers and then using it for whatever he wants. I thought you weren’t allowed to do that.

Tobias: Well, crypto is a brand-new world. There are no rules there.

Jake: Ah, okay, that’s the difference. Sorry, I was– [crosstalk]

Tobias: Because we’re in this world, so we’re seeing this stuff all the time. We know people that are involved or who at least know what’s going on. But I just wonder if the average person at home who doesn’t really pay attention this stuff really knows what’s happened. It sounds like this MIT grad, he’s has been trying his hardest and now, all of his philanthropic dreams have come to an end.

Jake: Yeah, it’s [crosstalk] shame.

Tobias: It’s all the passive voice. There’s no act– Nobody actually did anything bad. Nobody’s done anything, including him, particularly not him.

Jake: Yeah.

Bill: Is that the coverage? Is that what people are saying more or less?

Jake: Oh, it’s been Wall Street Journal, New York Times, Washington Post, all three of them have had these puffy pieces about how it’s such a shame that climate change is not going to be addressed now, because this– [crosstalk]

Tobias: Or the pandemic.

Jake: And the pandemic, yeah, or the next pandemic is going to be rough, because he’s not there to be our savior. It’s like this weird narrative.

Tobias: He’s handed out a lot of money to a lot of those groups. It’s amazing to see them all this– [crosstalk]

Jake: Journalists or– [chuckles]

Tobias: I think I don’t want to get this wrong, but I thought Vox was one of them. The Intercept certainly. They’ve all got pretty big slugs of money, like a few million bucks. Sorry if that’s not true for Vox. I’m pretty sure it’s true for the Intercept. None of them have disclosed any of that until they’ve been told to do so.

Jake: Calm out.

Tobias: Yeah.

Bill: Yeah. Well, and some of his backers probably have some media strings behind the scenes, right? It’s awful shit.

Tobias: A few podcasts that have been paid– [crosstalk]

Bill: Fuck that guy.

Jake: [laughs]

Tobias: A few podcasts have been made for mentioning– People are getting two and a half grand for saying FTX. Damn. I’d say it for one and a half thousand dollars. I’ll say it for one, FTX. Send the check.

Jake: Pay us. [laughs] You’re now in the long list of claimants- [crosstalk]

Tobias: Creditors.

Jake: -bankruptcy out of here. Creditor.

Tobias: [laughs]

Jake: It’ll be Thomas Braziel will be sending you a couple pennies out of the- [laughs]

Tobias: Yeah, are we getting some Lunar coin or something like that?

Jake: Yeah.

Tobias: Yeah.

Bill: The guy’s a piece of shit. What is there to write?

Tobias: Yeah, well, they’ve been– [crosstalk]

Bill: Cool. He’s a piece of shit that promised nice things, still a piece of shit.

Jake: [laughs]

Tobias: No dispute from me there. But you wouldn’t be allowed to write that piece, I don’t think. Nobody’s really written that piece.

Bill: That’s why they come to Value: After Hours, for the real news.

Tobias: Yeah, the truth. We don’t know anything either. We’re just speculating from the outside. [laughs]

Bill: That’s right.

You can find out more about the VALUE: After Hours Podcast here – VALUE: After Hours Podcast. You can also listen to the podcast on your favorite podcast platforms here:

Apple Podcasts Logo Apple Podcasts

Breaker Logo Breaker

PodBean Logo PodBean

Overcast Logo Overcast

 Youtube

Pocket Casts Logo Pocket Casts

RadioPublic Logo RadioPublic

Anchor Logo Anchor

Spotify Logo Spotify

Stitcher Logo Stitcher

Google Podcasts Logo Google Podcasts

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This Acquirers Multiple Stock Appearing In Dalio, Smith, Klarman Portfolios https://acquirersmultiple.com/2022/12/this-acquirers-multiple-stock-appearing-in-dalio-smith-klarman-portfolios/ https://acquirersmultiple.com/2022/12/this-acquirers-multiple-stock-appearing-in-dalio-smith-klarman-portfolios/#respond Thu, 08 Dec 2022 08:02:49 +0000 https://acquirersmultiple.com/?p=35566 Read More]]> Part of the weekly research here at The Acquirer’s Multiple features some of the top picks from our Stock Screeners and some top investors who are holding these same picks in their portfolios. Investors such as Warren Buffett, Joel Greenblatt, Carl Icahn, Jim Simons, Prem Watsa, Jeremy Grantham, Seth Klarman, Ray Dalio, and Howard Marks. The top investor data is provided from their latest 13F’s. This week we’ll take a look at:

Meta Platforms Inc (META)

Meta is the world’s largest online social network, with 2.5 billion monthly active users. Users engage with each other in different ways, exchanging messages and sharing news events, photos, and videos. On the video side, the firm is in the process of building a library of premium content and monetizing it via ads or subscription revenue. Meta refers to this as Facebook Watch. The firm’s ecosystem consists mainly of the Facebook app, Instagram, Messenger, WhatsApp, and many features surrounding these products. Users can access Facebook on mobile devices and desktops. Advertising revenue represents more than 90% of the firm’s total revenue, with 50% coming from the U.S. and Canada and 25% from Europe. With gross margins above 80%, Meta operates at a 30%-plus margin.

A quick look at the price chart below shows us that the stock is down 63% in the past twelve months. We currently have the stock trading on an Acquirer’s Multiple of 8.70 which means that it remains undervalued.

META Chart

META data by YCharts

Superinvestors who currently hold positions in the company include:

(Shares)

Ken Fisher – 11,826,476

Terry Smith – 5,480,284

Andreas Halvorsen – 5,351,499

Jean-Marie Eveillard – 5,298,041

Chase Coleman – 4,488,648

Steve Mandel – 2,913,821

Cliff Asness – 2,631,103

Ken Griffin – 2,426,244

Steve Cohen – 1,932,078

Steve Romick – 1,507,737

Lee Ainslie – 901,746

David Tepper – 875,000

Jim Simons – 845,000

Ray Dalio – 828,609

Seth Klarman – 688,851

Bill Miller – 287,879

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First Eagle: Small-Cap Silver Linings https://acquirersmultiple.com/2022/12/first-eagle-small-cap-silver-linings/ https://acquirersmultiple.com/2022/12/first-eagle-small-cap-silver-linings/#respond Thu, 08 Dec 2022 08:02:12 +0000 https://acquirersmultiple.com/?p=35640 Read More]]> In their latest paper titled, Small-Cap Silver Linings, First Eagle explain why small-cap stocks continue to outperform. Here’s an excerpt from the paper:

While persistently high inflation and the attendant policy tightening have pulled stocks decidedly lower year to date, we do not think that inflationary periods are a death knell for stocks. Notably, small cap value stocks historically have outperformed when inflation has run above its long-term median and when interest rates were biased higher.

Though smaller, value-oriented companies are not immune to the headwind of persistent inflation pressure, they do hold certain features; chief among these, in our view, is a relative insensitivity to changes in interest rates compared to more expensive growth stocks.

With the policy path to price stability uncertain, we expect market volatility is likely to remain pronounced. In our view, such an environment may create opportunities to acquire attractive small and microcap businesses that are trading below their normalized values and have specific catalysts for improvement.

While persistently high inflation and the attendant policy tightening has weighed on investor sentiment to result in a painful year-to-date 2022, such conditions haven’t proved to snuff out stocks in the past. A wide variety of equity sectors and markets have averaged positive annual returns when inflation was running above its long-term median (Exhibit 1) and when interest rates have been heading higher (Exhibit 2).

In both instances, small cap value stocks have historically delivered outsized gains.

We’ve heard a number of explanations for the historical outperformance of small cap value stocks during these periods. Indeed, there are a few attributes common among smaller businesses that may represent features to larger ones in an environment of rising prices and rates.

A smaller product line and workforce, for example, may translate into greater agility when responding to changing macro conditions, whether that means adjusting supply chains, raising prices or rationalizing headcount.

In a strong-dollar environment— year-to-date 2022, the US dollar is up more than 15% against a trade-weighted basket of major currencies—companies whose revenues are primarily domestic may avoid the currency-translation headwinds that face many US-based multinationals.

That said, we believe the main driver of small cap value’s relative outperformance has been these stocks’ limited sensitivity to changes in interest rates. Very low Treasury rates in the years following the global financial crisis translated into very low discount rates and promoted multiple expansion for businesses promising high levels of future growth.

You can read the entire paper here:

FEIM – Small Cap Silver Linings

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Chris Bloomstran: Don’t Screw Around With A 1% Position If You Know The Business & Its Valuation https://acquirersmultiple.com/2022/12/chris-bloomstran-dont-screw-around-with-a-1-position-if-you-know-the-business-its-valuation/ https://acquirersmultiple.com/2022/12/chris-bloomstran-dont-screw-around-with-a-1-position-if-you-know-the-business-its-valuation/#respond Thu, 08 Dec 2022 08:01:54 +0000 https://acquirersmultiple.com/?p=35646 Read More]]> In his recent interview with the Graham & Doddsville Newsletter, Chris Bloomstran explains why investors should not screw around with a 1% position if they know the business and its valuation. Here’s an excerpt from the interview:

Bloomstran: I got 1% of our capital in each and didn’t expect that the oil price was going to recover quickly. We wound up tripling our money on each of those positions, but I did it with only 2% of our money, which barely moves the needle.

We’re a lot better now about getting more money in early. You know the business. You know the valuation. When the two mesh and it’s the best idea in front of you, don’t screw around with 1%. There’s no rule, but I like to at least get at least 2% in general with a new idea.

We’re happy investing up to 3% or 4% very quickly, oftentimes in the first week of trading, because now I’ve spent 30 plus years doing this. And we’ve got a pretty good sense about the investment universe.

There are a few hundred companies that we follow pretty closely. We’re obviously going to follow any of the competitors of the businesses that we own. I’ve got a wish list of companies that we’d always like to buy at certain prices.

Oftentimes what happens is you get a March 2020 or you get a 2008-2009 when everything gets cheap. There you’ve got to figure out if you really want to bring in a wish list company or are you good with what you’ve got. And more often than not, you’re good with what you’ve got because you’ve done all the work on the portfolio names and especially the ones you want to own forever.

You can read the entire interview here:

Chris Bloomstran – Graham & Doddsville Newsletter (Fall 2022)

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10-3 Inversion and Recessions https://acquirersmultiple.com/2022/12/10-3-inversion-and-recessions/ https://acquirersmultiple.com/2022/12/10-3-inversion-and-recessions/#respond Thu, 08 Dec 2022 08:01:34 +0000 https://acquirersmultiple.com/?p=35594 Read More]]>

In their latest episode of the VALUE: After Hours Podcast, Brewster, Taylor, and Carlisle discuss 10-3 Inversion and Recessions. Here’s an excerpt from the episode:

Tobias: I like to check the 10:3 inversion every-

Jake: Four minutes. [laughs]

Tobias: -15 minutes or so.

Jake: Yeah.

Tobias: The 10:3, the most it’s ever been inverted is negative 0.77, which was the 2000 crash. It was at 0.73 on Friday, 0.72 today, something like that. So, it’s close to being as inverted, as steep as it’s ever been. I don’t know if that means anything. I don’t know if that’s relevant or it counts. It’s just [unintelligible 00:46:45] me out.

Jake: It’s just poor market– [crosstalk]

Tobias: What the last few years I think have shown us is how many times things that have never happened before have happened, how much unprecedented stuff has gone on. So, I don’t think 10:3 inversion is great. There’s a little bit more research that came out. Cam Harvey has said it’s 90 days of inversion. Another one came out and said– When I look at it, it just eyeballing it, it looks to me every single time that we’ve inverted, it’s preceded a recession by about six months. But this research came out, I’ve actually gone and looked at it. They said all you need is 10 consecutive days. So, we’ve well and truly had 10 consecutive days. I think it started October 25. So, it’s more than a month now.

Jake: Do you think we’ll get to Cam Harvey’s 90 days?

Tobias: I don’t know. I’ve got no idea. On this little bit of research that I saw, these guys have said that 10 consecutive days is all we need and it leads it by 10 months on average.

Jake: Okay. So, [crosstalk]

Tobias: That’s predicted eight of the last eight recessions over the 50 years.

Bill: I think we’re going into a recession.

Tobias: It seems inevitable, right?

Bill: Yes. Let’s assign probabilities to it. But I would say anywhere between 60% to 70%.

Tobias: Yeah, fair enough. But I would say higher than that. It would be the first time that this indicator has been wrong, if it’s wrong.

Bill: Yeah, I just know I don’t know anything greater than 70%.

Tobias: 40%. 40% is my prediction.

Jake: Yeah, that the– [crosstalk]

Bill: Yeah. There you go.

Jake: Classic.

Bill: No, the question is, what does it mean? I can’t see it being a good thing in the next 18 months.

Tobias: That’s right. I don’t know either.

Jake: What are we going to spend less money on? That’s I think the question we figure out.

Tobias: It just makes the E go down, which makes the P go higher, where there’s no market running out. So, the market gets more expensive and then the value does seem to predict–

Jake: Or it doesn’t.

Tobias: Yeah.

Bill: You know something I was thinking about today is, I think enterprise values might be a little misleading right now, because the bonds are not trading at par. So, enterprise value is probably screening a little higher than market would say it is. It’s kind of interesting.

Tobias: Because they can buy the bonds at a discount too.

Bill: Yeah.

Tobias: So, you think heavily indebted companies have less debt, because they could buy them back at discount.

Bill: Yeah. On the other hand, if that debt comes due, you don’t get to buy it back for pennies on the dollar. It’s a hundred cents that the debtors want or the creditors want. Yeah, I don’t know. It’s just something I was thinking about. It’d be nice to have mark to market enterprise values.

Tobias: That is interesting. Yeah. I saw this little tweet. This was– [crosstalk]

Jake: You think there’s real information in that though? Do you think the bond market has that kind of stuff right and you would want to change your EV calculation? Or you want the face value?

Bill: Uh, I don’t know.

Tobias: It is.

Bill: I think it probably depends.

Jake: We use market cap. So, that moves around all over the place. Why does the debt sit still?

Bill: Yeah. Well, I think because it’s a contract, but I get your point. I guess it probably makes sense to market to market until it doesn’t make sense in which case you’re totally screwed. So, it’s probably better to just be conservative all the time.

Tobias: Bram de Haas has a good line on– I think this is the inversion. “Maybe it doesn’t predict but cause it.” I did wonder about that a little bit too, whether there was something in the curve– [crosstalk]

Jake: Growth’s going a different way?

Tobias: Yeah, it wasn’t so much a prediction, but it shows there’s some malfunction in the underlying market.

Bill: Well, you get a lot less incentive to take long-term debt risk.

Tobias: Debt paid on the short term.

Bill: You combine that with credit standards that are starting to tighten. This is not a positive for velocity of money.

Tobias: Somebody sent me an interesting note that said that the inversion was the ordinary case. It’s only a reasonably recent phenomenon that there haven’t been an inversion, that when we were on the gold standard for hundreds and hundreds of years when there was essentially no inflation whatsoever and wealthy aristocrats used to put their money into gilts, they all traded in an inversion. I guess it was because they tended to put their money out on the short-term market and that doesn’t really make sense either, does it? [crosstalk]

Jake: No, that would be the opposite, right?

Tobias: Yeah, this doesn’t make sense.

Jake: There’s more demand for shorter-term, right?

Tobias: Yeah. I don’t know. The Twitter account sent me a paper. That’s apparently that’s pretty well known, the inversion zone. The inversion is the ordinary case. Before then, it was rare that it was the other way around– [crosstalk]

Jake: Well, I guess just you have natural deflation, which is what the 1800s saw.

Tobias: Maybe it’s predicting in deflation. Maybe that’s what it’s doing.

Jake: Yeah, so like further 10 years from now-

Tobias: That’s interesting.

Jake: -you would have a negative– [crosstalk]

Tobias: It’s predicting inflation– It’s predicting inflation or deflation depending on how the shape of the curve goes and that might be worth a paper.

Bill: I’ve been thinking about Peter Zeihan’s book. If anybody can introduce me, that’d be awesome, because I don’t want to just tweet it at them and continue to ask them on the pod. That’s a little bit loser-y.

Jake: [laughs]

Bill: But the amount of- [crosstalk]

Tobias: Whatever gets it done.

Jake: Yeah.

You can find out more about the VALUE: After Hours Podcast here – VALUE: After Hours Podcast. You can also listen to the podcast on your favorite podcast platforms here:

Apple Podcasts Logo Apple Podcasts

Breaker Logo Breaker

PodBean Logo PodBean

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One Stock Superinvestors Are Selling https://acquirersmultiple.com/2022/12/one-stock-superinvestors-are-selling-120/ https://acquirersmultiple.com/2022/12/one-stock-superinvestors-are-selling-120/#respond Wed, 07 Dec 2022 07:59:37 +0000 https://acquirersmultiple.com/?p=35579 Read More]]> As part of the weekly research here at The Acquirer’s Multiple we’re always interested in superinvestors who hold the same stocks that appear in our Acquirer’s Multiple Stock Screeners, based on their latest 13F’s. Investors such as Warren Buffett, Joel Greenblatt, Carl Icahn, Jim Simons, Prem Watsa, Jeremy Grantham, Seth Klarman, Ray Dalio, and Howard Marks.

While doing this research we’ve also uncovered a number of stocks that superinvestors have sold, or reduced in their portfolios, according to their latest 13f’s. So we’re now providing a new weekly feature article called ‘One Stock Superinvestors Are Selling‘. This week we’ll take a look at:

Merck & Co Inc (MRK)

Merck makes pharmaceutical products to treat several conditions in a number of therapeutic areas, including cardiometabolic disease, cancer, and infections. Within cancer, the firm’s immuno-oncology platform is growing as a major contributor to overall sales. The company also has a substantial vaccine business, with treatments to prevent hepatitis B and pediatric diseases as well as HPV and shingles. Additionally, Merck sells animal health-related drugs. From a geographical perspective, just under half of the company’s sales are generated in the United States.

A quick look at the price chart below for the company shows us that the stock is up 47% in the past twelve months.

MRK Chart

MRK data by YCharts

Superinvestors who reduced, or sold out of the company’s stock, according to their latest 13Fs, include:

(Remaining shares)

Ken Fisher – 12,036,457

Jim Simons – 4,563,234

Cliff Asness – 3,926,972

Steve Cohen – 594,800

Joel Greenblatt – 179,346

Mario Gabelli – 172,885

Rich Pzena – 6,425

Tom Russo – 3,858

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Lindsell Train: How To Find Companies That Will Survive In The Long-Term https://acquirersmultiple.com/2022/12/lindsell-train-how-to-find-companies-that-will-survive-in-the-long-term/ https://acquirersmultiple.com/2022/12/lindsell-train-how-to-find-companies-that-will-survive-in-the-long-term/#respond Wed, 07 Dec 2022 07:59:03 +0000 https://acquirersmultiple.com/?p=35635 Read More]]> In their latest presentation titled – The Triumph of Experience Over Hope, Lindsell Train discuss how to find companies that will survive in the long-term. Here’s an excerpt from the presentation:

In closing however, I want to acknowledge an obvious criticism to all of this, that clearly there is survivorship bias at play. It’s all very well to look back at dividend and share price stats from now successful companies, like the LSE or Pepsi, but how do you pick the winners beforehand?

How do you predict this before the event?

And, that I would argue is precisely the point. That working this out in advance is extremely hard, if not impossible – so why try?

Why not embrace the inevitable survivor bias, and only pick from a universe of companies that have already succeeded?

Work on the basis that their age and permanence make them more reliable, more durable, and that you have time on your side as an empirical judge of this. And so, when we look at our portfolio of successful survivors, we view their best years as still ahead of them.

They are all in possession of deep and deepening moats, based around unique heritage-enriched brands, IP, and self-reinforcing networks. We have owned all but four for over a decade already and hope to still own most a decade from now as well.

You can read the entire presentation here:

Lindsell Train – The Triumph of Experience Over Hope

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Howard Marks: Today’s Conditions Are Better For The Bargain Hunter Since GFC https://acquirersmultiple.com/2022/12/howard-marks-todays-conditions-are-better-for-the-bargain-hunter-since-gfc/ https://acquirersmultiple.com/2022/12/howard-marks-todays-conditions-are-better-for-the-bargain-hunter-since-gfc/#respond Wed, 07 Dec 2022 07:58:41 +0000 https://acquirersmultiple.com/?p=35629 Read More]]> During his recent interview with Forbes, Howard Marks explained why today’s conditions are better for the bargain hunter since the GFC. Here’s an excerpt from the interview:

Back in ’79, most of your viewers may not remember but Business Week ran an article, The Death of Equities, and basically what it said is equities have done so badly that nobody will ever buy them. Which makes absolutely no sense. If they’ve done badly that means they must be cheap and people should buy them.

And that was the same condition in 2012 and I wrote Deja Vu All Over Again and so forth.

So the point is we do vary our degree of aggressiveness and defenseness. We vary our degree of fundraising, how much money we should have under management.

Clearly when the opportunities are better we should have more money. When the opportunities are less good we should have less.

And I think that’s an important thing that distinguishes OakTree is that we’re willing to have less when it’s appropriate.

Today I’m in a fairly normal posture except increasing my aggressiveness. I think that the conditions for the bargain hunter, for the lender, for the asset buyer today are better than they have been since the global financial crisis, which ended in 2008. We’ve been… tough times for the bargain hunter for the last 14 years.

I think we’re in a better situation today so I would increase my level of aggressiveness.

You can watch the entire discussion here:

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Cathie Wood Predicts Bitcoin To $1 Million By 2030 https://acquirersmultiple.com/2022/12/cathie-wood-predicts-bitcoin-to-1-million-by-2030/ https://acquirersmultiple.com/2022/12/cathie-wood-predicts-bitcoin-to-1-million-by-2030/#respond Wed, 07 Dec 2022 07:58:16 +0000 https://acquirersmultiple.com/?p=35593 Read More]]>

In their latest episode of the VALUE: After Hours Podcast, Brewster, Taylor, and Carlisle discuss Cathie Wood Predicts Bitcoin To $1 Million By 2030. Here’s an excerpt from the episode:

Tobias: Oh, the other thing was, I think this happened after the show, but Cathie Wood has called for bitcoin to a million bucks.

Bill: Okay.

Jake: What?

Tobias: So, I’m updating my forecast to a million billion. So, when it goes through a million dollars then, I’ll be right ultimately. A million billion.

Jake: Does she own bitcoin in ARK’s ETFs?

Tobias: She did it at one point, but she was forced to liquidate.

Jake: Why? Because it’s not approved securities or something?

Tobias: I don’t know. Maybe she was forced to liquidate part of this. That’s the way I understand it. Anyway, there’s some holding in that head to go.

Jake: Probably, because liquidated the top.

Bill: [crosstalk] down innovation.

Jake: Could be that.

Tobias: Innovation. Field of innovation.

Jake: Was that like a GE tagline? [laughs]

Tobias: No, it was Mr. Burns gave Homer Simpson an Excellent in the Field of Excellence Award.

Jake: Okay.

Tobias: “Quadrillion zillion.” Yeah, thanks. Value Stock’s in the house. Valley Stock Geek.

Jake: VSG.

Tobias: What’s the point of coming out with your million-dollar target on bitcoin other than to get attention?

Bill: That’s the point.

Tobias: So silly.

Jake: That’s [laughs] to it.

Bill: I bet we talk about her more than almost any other asset manager.

Tobias: Yeah, that’s probably fair.

Bill: So, that’s the point, right?

Jake: She’s living rent free right here.

Liver King Busted After Leaked Email

Tobias: But then, here’s the thing. So, Liver King got busted last night. You guys know who the Liver King is?

Jake: I’ve heard of him. Yeah, what happened?

Tobias: I can’t avoid him. It’s like this bloody Tate brothers are all over everything all the time too. But Liver King, clearly roided out of his eyeballs. He’s got this red physique. He’s got the veins and the shoulders, which are usually a pretty good indicator that somebody’s doing– So, I don’t think you can tell if somebody’s on gear, but I think you can tell with some physiques that can only get better using gear. He’s clearly that dude, right? And so, last night, he’s got busted because he’s sent some emails, needing some advice and laying out what he was taking. It’s like $15,000 a month in– [crosstalk]

Jake: In pharmacology?

Tobias: Do you want to take ancestral living advice from that bloke? No. Do you want to take financial advice from Cathie? No. I don’t think it helps you to be out there saying dumb shit all the time.

Bill: Yeah, but I guess it’s just like what’s the game she’s playing. Do we think she’s playing an investment return game? Is that really the game that she’s playing at this point?

Tobias: Yeah, I think that’s what she’s trying to do. 100%.

Bill: I think that’s what you’re doing. I don’t think that’s what she’s doing. [crosstalk]

Tobias: 100% she is.

Jake: Is it 100% game then?

Tobias: It’s both.

Bill: I don’t think so anymore, man. I think it’s just an AUM game and just trying to eke out whatever’s left of her reputation, get paid, and then disappear. Maybe go away for a couple years, open up the next fund, say smelling [crosstalk] shit. Yeah, she’s got one shot.

Tobias: She’s got to get attention.

Bill: I bet she’s made life-changing money.

Tobias: Oh, for sure. Yeah, for sure.

Bill: So, who the fuck cares?

Jake: [laughs]

Bill: You would care. But that’s why I like you.

Tobias: [crosstalk] All you got is reputation. All that other shit goes away.

Bill: Once you go to the beach and you’re no longer talking to people, you could get another reputation.

Jake: [laughs] Buy another one.

Bill: [crosstalk] came to the Bahamas.

Tobias: Yeah.

Jake: That’s fair. I’m not sure I want to live like that though.

Bill: I know, but I don’t think that you can view the lens of your personal views and try to attribute what’s going on with her. I don’t think you’re the type of guy that would ever get on and say, “Berkshire’s going to a million dollars a share tomorrow.”

Tobias: Anytime anybody pushes their virtue forward, their religion or any of those sort of things like ESG. I’m always nervous. They’re just trying to distract you from what’s really going on underneath. [crosstalk] the ARK.

Bill: You need– [crosstalk]

Tobias: Innovation in the field of innovation.

Bill: That’s right.

Tobias: I’m up for human life-changing innovation.

Bill: I used to want to interview her, not so much anymore.

Tobias: I just don’t think you get a straight answer. There’s no self-reflection.

Bill: Yeah, I don’t know, man. We’ll see.

Jake: I could take the other side of this and say that I think she honestly believes all the stuff.

Tobias: I think so too. I think she honestly– [crosstalk]

Jake: Whether you think that that’s a realistic state of the world, then that’s a different conversation. But I think she’s earnest in what she’s saying. I’m not sure about the math always. Sometimes, it’s a little mathematically challenged but, hey, it takes lot of different viewpoints.

Tobias: But there are things that are knowable and there are things that are unknowable. If somebody is standing there telling you something that they know something that is unknowable, then I know that they don’t know the very basic– Don’t put this on a t shirt. They haven’t figured out the very basic circle of competence type idea. They don’t know what they can know and what they can’t know. They haven’t ever thought about that line and that person is dangerous.

Jake: Yeah, I would say that’s fair. I guess I’m scoring on intentions here.

Bill: I guess I almost think that– [crosstalk]

Tobias: I don’t know. [crosstalk]

Jake: Yes.

Bill: I think we all agree she’s fairly intelligent, right?

Tobias: No question about intelligence.

Bill: So, I guess I’m not as willing to think that she actually believes what she’s saying, because I think she’s too intelligent to actually believe what she’s saying when she puts a number behind it. It almost strikes me as you’d have to be so dumb to believe that you can make those predictions with accuracy. I don’t think she’s dumb.

Tobias: Motivated reasoning.

Jake: Mm.

Tobias: Motivated reasoning. Part of it too is she’s created this image of innovation in the field of innovation. So now, you can’t really step back from that and say, “Well, what I really want is cash flows.”

Jake: Yeah.

Tobias: Things that have traditionally– [crosstalk]

Jake: You tied to that math– [crosstalk]

Bill: Oh, I don’t think that’s true. I think there’s a very easy pivot for her to say, “These companies are going to be so profitable in the future and we just need to go through a little reset here and we’re comfortable with our long-term secular themes,” without saying stuff like, “We’re going to compound at 40% forward or bitcoin’s going to a million.” I think that there were a lot of chances for her to pivot. Now, less so.

Tobias: But if what you’re saying is we’re always finding these– We are able to identify cutting-edge technology in the public markets. It’s like a VC saying we’ve got this superior ability to identify all these new trends. If you then say what we’re doing is we’re looking for stuff that’s– I guess you are saying– [crosstalk]

Jake: Real businesses?

Tobias: Yeah, real businesses, that doesn’t sort of– You’re already seeing we’re not out right on the cutting edge. Now, we’re stepping back towards this a little bit further back during the– we’re at the cash cow end of the cycle, not whatever comes first.

Bill: Yeah, I guess, I don’t think that that’s necessarily true. I think that you can be looking for the cash cows of tomorrow and continue to do that. But I think that once you start putting forward numbers out there– and there’s a reason that regulators don’t let people typically talk like this.

Jake: Yeah. [laughs]

Bill: I think she’s smart enough to know that. That’s why, I don’t know, I’ve started to get a little more offended over time the longer it’s gone on.

Jake: That’s fair, because I do think that a lot of regular people who don’t do a lot of financial stuff see that and they don’t know that you’re not supposed to talk like that.

Tobias: David Wilson makes a good point. He says, “Tesla to $5,000 actually happened. Once you make one right prediction, it gives you leeway to keep making predictions.” That’s fair. That was a complete non-consensus view that did seem to happen.

Bill: Yeah. Bitcoin could hit a million. The dollar could be worth nothing. It’s possible.

Tobias: Bitcoin can do anything. But to come out and predict it’ll hit a million, it’s silly, right? Show us the reasoning for a million dollars. If it’s like she’s BTC maximalist because as you say, money gets inflated and nothing, then make that case.

Bill: Yeah, and assign a probability to it.

Tobias: 100%.

Bill: Keep playing. It’s not sexy to do such things.

Jake: Nope. But that’s actual real work.

Tobias: I’ll tell you something about bitcoin. Bitcoin, when it ran to $20,000 the first time, that was 2017 and it was around about this time–

Jake: Yeah, [crosstalk] 2017.

Tobias: Right, it was around about this time, 2017, that everybody was going completely apeshit. It ran from $15,000 to $20,000. It was all over the news, it was everywhere. We’re now below $20,000. So, there’s a reasonable chance that the five-year on bitcoin goes negative in the next couple of weeks.

Jake: Yeah, I stole something that Buffett did when– remember he talked about the cube of gold sitting inside an infield and then what else could you buy instead of that? And he talked about, I don’t know, it was like 18 Exxons and a whole bunch of other stuff, and you still had a billion dollars of walking around money. I stole that mental model and used it for bitcoin. And instead, you could get Intel, AMD, Micron, Nvidia, basically almost the whole computer hardware industry. Own all the picks, all the shovels, and still have some cash for walking around money.

Then I went back, I don’t know, maybe last year or something and looked to see what had bitcoin done versus my basket of things that I bought or that you could have theoretically bought for the same market cap as bitcoin and it was like– It wasn’t even close. Owning productive businesses crushed owning a token.

Tobias: To be fair, the $20,000 in 2017, it kissed and then fell back to whatever $3,000 or something like that. And then, it went to $60,000. So, there’s a chance of a 20 bag– That’s always what bitcoin’s got going for it. It’s got that massive volatility that it comes back down at some price. The only that– [crosstalk]

Jake: Well, if there’s nothing to anchor to, then you can go as high as the next guy wants to trade it for.

Tobias: A million’s a possibility, like any kind of number is a possibility.

Jake: Mm. Whoa, what if this is just a big St. Petersburg Paradox playing out, where if it’s a big enough number than the expected value, then you have to put all your chips in on.

Tobias: Yeah.

Jake: No, don’t do that.

You can find out more about the VALUE: After Hours Podcast here – VALUE: After Hours Podcast. You can also listen to the podcast on your favorite podcast platforms here:

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One Stock Superinvestors Are Buying https://acquirersmultiple.com/2022/12/one-stock-superinvestors-are-buying-79/ https://acquirersmultiple.com/2022/12/one-stock-superinvestors-are-buying-79/#respond Tue, 06 Dec 2022 07:58:11 +0000 https://acquirersmultiple.com/?p=35574 Read More]]> As part of the weekly research here at The Acquirer’s Multiple we’re always interested in investing gurus who hold the same stocks that appear in our Acquirer’s Multiple Stock Screeners, based on their latest 13F’s. Investors such as Warren Buffett, Joel Greenblatt, Carl Icahn, Jim Simons, Prem Watsa, Jeremy Grantham, Seth Klarman, Ray Dalio, and Howard Marks.

While doing this research we’ve also uncovered a number of common stocks that investing gurus have recently bought, or continuing to hold in their portfolios, according to their latest 13f’s. So we’re now providing a new weekly feature article called ‘One Stock Superinvestors Are Buying’. This week we’ll take a look at:

Microsoft Corp (MSFT)

Microsoft develops and licenses consumer and enterprise software. It is known for its Windows operating systems and Office productivity suite. The company is organized into three equally sized broad segments: productivity and business processes (legacy Microsoft Office, cloud-based Office 365, Exchange, SharePoint, Skype, LinkedIn, Dynamics), intelligence cloud (infrastructure- and platform-as-a-service offerings Azure, Windows Server OS, SQL Server), and more personal computing (Windows Client, Xbox, Bing search, display advertising, and Surface laptops, tablets, and desktops).

A quick look at the price chart below for the company shows us that the stock is down 23% in the past twelve months.

MSFT Chart

MSFT data by YCharts

Superinvestors who recently bought, or continue to hold the stock, according to their latest 13Fs include:

(Shares)

Ken Fisher – 29,016,805

Chris Hohn – 19,877,677

Chase Coleman – 6,004,108

Cliff Asness – 4,748,900

Jim Simons – 3,824,284

Andreas Halvorsen – 3,510,344

Ken Griffin – 1,767,258

Steve Cohen – 957,370

Lee Ainslie – 602,018

Ray Dalio – 319,015

Mario Gabelli – 144,493

Louis Bacon – 86,112

Paul Tudor Jones – 27,035

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Mohnish Pabrai: Auction Driven Markets Really Are A Gift To Investors https://acquirersmultiple.com/2022/12/mohnish-pabrai-auction-driven-markets-really-are-a-gift-to-investors/ https://acquirersmultiple.com/2022/12/mohnish-pabrai-auction-driven-markets-really-are-a-gift-to-investors/#respond Tue, 06 Dec 2022 07:57:46 +0000 https://acquirersmultiple.com/?p=35624 Read More]]> During his recent interview with Guy Spier at the Helvetian Investment Club, Mohnish Pabrai explained why auction driven markets are really a gift to investors. Here’s an excerpt from the interview:

Pabrai: So basically in a negotiated transaction you have a intelligent buyer, most of the time you have an intelligent buyer facing an intelligent seller. And they arrive their price discovery, and they arrive at a price that works.

In auction driven markets, especially if there is distress, you’re going to get crazy pricing sometimes. You’re going to get crazy pricing where things are very euphoric, kind of like you know Snowflake after the IPO. Or Carvana after the IPO.

And subsequently… or you can get extremely depressed pricing because it’s faceless buyers and sellers doing different things which attenuate the ranges.

So it’s because of that more extreme attenuation that Guy and I are able to make a living and I think it’s a lot harder if I were to go into private equity then you’re playing other games, like you’re levering up and different things like that.

And you know putting lipstick on a pig sometimes and so on so forth. So I think that it’s harder to do it in most of the asset classes than it is in auction driven markets.

Auction driven markets really are a gift to investors.

You can watch the entire discussion here:

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Bill Ackman: The Two Places To Invest Capital Right Now https://acquirersmultiple.com/2022/12/bill-ackman-the-two-places-to-invest-capital-right-now/ https://acquirersmultiple.com/2022/12/bill-ackman-the-two-places-to-invest-capital-right-now/#respond Tue, 06 Dec 2022 07:57:25 +0000 https://acquirersmultiple.com/?p=35621 Read More]]> During his recent interview with AJ Bell, Bill Ackman discussed the two places where he’s investing his capital right now. Here’s an excerpt from the interview:

Ackman: So we put our capital in two places. One, we launched one of the more aggressive buy-back programs out there. We’re buying in about a million and a half shares you know approaching about three quarters of a percent of our shares outstanding every month.

That’s a pretty aggressive program. It’s about 28% of the average shares outstanding. We think that’s the easiest investment that we can make right now.

One, we’re well capitalized you know plenty of cash on hand. Two, we’re trading at… as you know a 35% discount to NAV. Three, our companies are trading at in our view deep discounts to their intrinsic values. You get the benefit of that double discount. So we think that’s been a good place to deploy capital.

The other place we’ve been deploying capital is some of these sort of more opportunistic hedges. We’re investing a relatively small you know maybe one, two, two and a half percent of our capital in each of these various commitments together comprising at cost you know five or six percent of our capital.

But Investments we can make 6X, 8X, 10x and sometimes more, that seems a better use of capital for our marginal dollar than the next big equity commitment, and we’ve looked at a couple of things become closer to prices where we would own them, but stocks haven’t really gotten cheap enough for us to take our last dollar and buy the next big commitment.

You can watch the entire discussion here:

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Journalytic Launch https://acquirersmultiple.com/2022/12/journalytic-launch/ https://acquirersmultiple.com/2022/12/journalytic-launch/#respond Tue, 06 Dec 2022 07:57:07 +0000 https://acquirersmultiple.com/?p=35589 Read More]]>

In their latest episode of the VALUE: After Hours Podcast, Brewster, Taylor, and Carlisle discuss the Journalytic Launch. Here’s an excerpt from the episode:

Tobias: JT, you want to you want to take us away on the Journalytic journey?

Jake: Yes, please. So, yeah, today– [crosstalk]

Tobias: What is Journalytic?

Jake: Well, hold on, Toby.

Tobias: Sorry, dude. You’ve got a presentation. [crosstalk]

Jake: [laughs]

Tobias: Take it away.

Jake: Son of a bitch. So, today is a very special day for me. It’s literally years in the making to get to today. In some ways, it’s been more than 10 years to get to this very day. So, yes, as Toby was alluding to, this project that I’ve been working on is called Journalytic. It is open now for anyone who wants to go in there and log in and get journaling. We’ve been previously in a closed kind of beta, kind of invite only, but now it’s open to anybody. I thought maybe I would just like walk through what some of my motivations were for trying to build this thing.

If to rewind, go back, I’ve tried all kinds of different note taking apps over the years. Notion, and Roam, and Google Docs, and Slack channels with myself, all kinds of stuff. It always felt something was missing because all of those are such general-purpose tools. I was always wondering like, “Where’s that perfect investment journaling app that’s custom built for investment?” It’s a very specific use case, and I could never find it. So, I decided, yeah, maybe I’ll try to build something for myself internally running Farnam Street.

It turned out I felt what I was exploring and what I was wanting to get built, I’ve realized that might be able to help a lot of other people too. And so, the project got a little bit bigger than that, than just purely an internal tool to be built. I started building a team around me to help do it right. I’ve been incredibly blessed with the guys, with a super talented team that has come together to work on this project with me. The number of man years that are already invested in this is a little bit sickening in some ways, but [chuckles] it’s also exciting to finally get it out.

I had three primary desires, these itches of my own that I was trying to scratch with building this. The first one is that I wanted to feel more organized. So, for years, I had research all over the place. I would take notes in these yellow legal pads. They start stacking up. Some of them had investment research. Some of them had book notes. Some of them had just general interest notes. They were stacked up everywhere. Some were at home. Some were at the office. I couldn’t find what I was looking for most of the time. It was just a mess.

The real problem is that I couldn’t really search across them and I couldn’t leave tags for myself to find later, like little breadcrumbs that help you connect dots. I knew I was having a lot less epiphanies than I should have been having, because you can only load so much RAM into the RAM of your brain at any one time. So, to be able to work with the information, the material, it helps to have it in this external brain. And so, that’s what I’ve been trying to build to stay organized.

And now, Journalytic is basically my external brain for the last 18 months that I’ve been using it. I can easily organize all my notes. It uses this $1 sign, like a cash tag like Twitter does, where you could put in $MKL, and then all of your notes would be Markel related to– It would then be organized by Markel. And you could then search and just look and see all your notes for Markel. Or a hash tag with a particular phrase on it or a note that helps you to keep things organized, and to then be able to search through your different hashtags.

One of the things that I do regularly is I’ll use #redflag or #greenflag. As I’m going through, let’s say, a 10k, I’ll just affix a little #redflag on something that I don’t like. Anything on its own is not that big of a deal, but because it’s actually colored red and colored green, I can go through my notes really quickly for an idea and I could see like, “Oh, shit. There’s a bunch of red flags that have been accumulating and I didn’t notice it as I was going through in real time. But now that I can see the whole sweep of it and see the color, it starts to stand out. Now, maybe I need to re-underwrite some of my thinking about it.”

I also use the hashtags for scoring. So, I’ll put #capitalallocation1 or #capitalallocatioin2 or #capitalallocatioin3. One will be like when I see good cap allocation or three will be bad, and so I can start to score different companies, different management. Maybe I could do culture as well as a scoring or returns on capital, different things. Then, I could click through and see like, “Oh, here are all my companies that I’ve seen #capallocation1. These guys are really good at it. Is there anything common between all of them that I can then look for in another pattern matching for another company?”

The ability to search multiple items at one time. I can put in, let’s say, #thesis and then $Fairfax, and then it’ll quickly just show me right away like, “Okay, here’s my thesis for owning Fairfax,” or, “Here’s a KPI at Markel,” and then I can see, “Okay, here are the KPIs I keep my eye on for Markel.”‘ And then of course, you can backlink between entries so that you can organize webs of information.

The second human need that I was really trying to go after was to hold myself accountable. I knew that there were places in my process where I was being sloppy. I would research a name for a little while, I’d get distracted, and then I’d end up not finishing my process. I’d move on to something else that was a shiny object. I had an investment checklist, but it was this really long document that I would just go through and kind of like, “Oh, yeah, this doesn’t really matter” or, “Yeah, I should look into this later.” It really was defeating the whole purpose of having a checklist, which is to have system to thinking trigger to use [unintelligible 00:25:25] terminology. You’re not just blowing through it. A lot of times, I wouldn’t write anything down as I was going through my checklist. So, I wouldn’t be able to see how things were changing as I would rerun the checklist, which is really important.

So now, I can hold myself accountable in Journalytic in whole bunch of different ways. You can look through this idea list so you can see where all your ideas are in process. I can see where I got the idea, so the source of the idea. So, I have an idea of who is giving me good ideas and who isn’t, which is pretty powerful. It’s really easy to run checklists in there. We have 45 different categories of checklists that we’ve prebuilt into here. There’s more than 300 individual checklist items to work through if you want to build your own checklists within there. I can set reminders to follow up on different events like let’s say that there’s a management says something and I want to go and keep an eye on like, “Okay, well, they said within six months, this was going to happen. I’ll set a reminder,” and it’ll pop up and tell me like, “Hey, you wanted to go look at this.” And now, I can go check and see did management execute on what they said they’re going to do.

There’s also this cool thing where you can set an inactivity alert for a particular idea. Let’s say it’s been 30 days or 90 days, and you haven’t journaled about that idea, it’ll give you an alert if you set it so that you can make sure you stay up on all your stuff that you own or things that you would like to own.

It’s really easy to record probabilistic predictions, so to get back to, is Cathie doing a probability prediction of bitcoin at a million. It’s really trying to behave super forecasters like Phil Tetlock would tell you what you should be doing. Then, you could create contracts with yourself. Last week, we were talking about kill criteria. That’s one of the things that I have in there is, I have kill criteria set for ideas. It’s really about putting my best intentions into this contract with myself so that it helps control my behavioral biases that might be creeping in sunk cost bias.

Then, the last thing was that I wanted to really understand myself better as an investor. I knew that there were all kinds of data about my investment process that were really going unrecorded. I couldn’t learn from any of that because I didn’t have the data. So, where are my blind spots and what feedback loops were currently stuck open that if I could close them, I could learn so much more? Right now, Journalytic makes it really easy and fast to record a decision. Buy and sell decisions, obviously, a lot of people do that, but also actually pass and hold decisions and what’s my reasoning for each one. Why am I buying? Why am I selling? Why am I passing? Why am I holding? And then, to go back and look at the reason code that I use for each one of those particular buckets of decisions and I could see what the returns were really easily for those decisions in real time, it allows me to go and look at systematic biases that I have in my reasoning.

Also, the ability to see which ideas am I spending the most time on. Does that match up with where I have my portfolio allocated? Am I spending a bunch of time on ideas I don’t even own and I’m basically chasing shiny objects? Do I get better returns from focusing on my existing portfolio and understanding those names better or looking for some new opportunity? How many ideas am I looking at per year? How many decisions am I making per year? What’s my swing rate on buying versus passing? How many rocks am I turning over? How many things am I buying or not? All those stuff, I think, is really cool to know.

Then, the ability to record feelings and then see them overlaid really easily on a price chart, we’ve built this. And so, I really want to see how price is driving my own sentiment as much because I fear that it is. I’ve already seen that it does somewhat, which is a little bit scary. So, it shows you what Kahneman said before about like, “Just because the biases, it doesn’t mean that you’re necessarily controlling for them unless you take very specific actions.” This whole thing is built to basically try to help you take more specific actions that will control your behavioral biases.

My ask of the audience is to go to journalytic.com, create an account, it’s free. This particular set of features that we built to start is going to most likely– I’m pretty sure it’s going to stay free for as long as we do it. We’ll build other things that eventually will turn this into a business. But for now, we just want to get people in there and get them working on stuff and becoming better investors. And then, I would ask that you just record one feeling about any investment that you’ve been making or that you’ve been thinking about lately. And then, navigate to that price chart for that. It’s inside of there. It’s very easy. And then, see your feeling that’s recorded on that price chart and then imagine yourself, if you continually record that type of thing to see what’s going to happen, how price is changing your sentiment, I think it’s super powerful to just get started.

My hope is that these tools are going to turn all of us into way better investors than we would have been. I love the idea that our group of people who are using it are ironing out a bunch of the inefficiencies in the market and becoming the best version that they can become of investors. So, longtime in coming, lot of thought and effort and human– just thinking about this over and over and over again and working it out to figure out what’s the best way to structure this so it’s not overly complicated, but it’s still very easy to use. I’ve been using it now for about 18 months like a rudimentary version. I’ve got now more than, think 1,900 entries over that time period. I can search through any of them and I could see all kinds of stuff about myself. The more that I put in there, the more that I’m learning about myself. It’s starting to become an exponential curve to that. If you’re into self-improvement, I don’t think there’s a better tool out there for that. So, that’s the [crosstalk]

Tobias: Congrats, JT. Congrats there.

Jake: Thanks, man.

Tobias: Longtime coming.

Jake: Yeah, longtime coming. How long have we been talking about this behind the scenes? [laughs] Forever.

Tobias: At least 18 months. Two years, maybe more than that.

Jake: Oh, Jesus.

Bill: So, you are giving it away free to everyone?

Jake: Yes.

Bill: Free?

Jake: [laughs] Free for– [crosstalk]

Bill: So, there is no reason that anyone shouldn’t at least check this out.

Tobias: Just $19.95 and postage– [laughs]

Jake: Yeah. [laughs]

Bill: I’m a little upset because I thought I was special but we’ll take that offline.

Jake: Yeah. [laughs] Well, listen, you got into the beta before it was open. So, that’s [crosstalk] entire special.

Bill: That’s right. I missed one of our scheduling sessions, which I’m sure would drove you a little nuts as it should have. But it’s a great product. I think Jake’s the right guy to bring something like this to market.

Jake: Thank you.

Bill: I don’t know if that helps you, by the way. The audience that loves you may not like me, but [Jake laughs] we are together on this one. Sympatico.

Tobias: You sent me some insights that you’d had and we’ll try to work out to what extent is that the market and to what extent is that you. But do you feel comfortable? Can you share some of those ideas that– I can probably pull it up. [crosstalk]

Jake: Are you talking about my decision analysis?

Tobias: Yeah. It doesn’t have to be the actual detail of it, just to give a flavor of what you do. Because I thought that was interesting. I thought it was useful.

Jake: Yeah. Maybe it would be good if you pulled up because you probably have that.

Tobias: Let me see. Not far back we have to go.

Jake: Well, here you go. I’m searching my process hashtag, which will take me right to that.

Tobias: Oh, yeah, I do have it here. I won’t read it. I’ll just lead you into it.

Jake: Yeah. All right, for buying things by reason codes, some interesting things that stood out from that, it’s a little bit annoying in some ways to look at this stuff. But when I had “increasing certainty” about an idea, yeah, that performed quite poorly. When I had loved the business, that didn’t do very well either. [chuckles] When I had asymmetric outcomes, which I thought was a dondo idea of heads I win, tails I don’t lose much, it turns out I lost more than I thought I was going to.

Tobias: [laughs]

Jake: [laughs] But my core strategies of things that I work on like finding good cap allocators and reversion to the mean, I would call it which is basically traditional quant value bets, both of those did quite well and those tend to be the majority of how my assets are positioned. In general, it wasn’t as bad as it looked on a dollar-weighted basis, but there were definitely some surprises in there of things like increasing certainty and asymmetric outcomes both shoved it on me. [chuckles]

Tobias: It’s not a probably a long enough period of time to separate it out from what’s happened in the market. It’s probably been a market that’s shifted from better businesses to more quant type value, just deep value.

Jake: Yeah.

Tobias: But it’d be interesting to see that over time as the cycles change, see which ones– whether you do it like being a better business is more important over– So, maybe 18 months.

Jake: Right.

Tobias: Absolutely, cheapness is the right way to be, but five years– [crosstalk]

Jake: Or, maybe I’m not as good at identifying good business– [crosstalk]

Tobias: But that’s good to know too. That’s what you want to get told. That’s what you want to learn.

Jake: Yeah.

Tobias: That’s the idea.

Jake: That’s really what it’s all about. It’s just trying to close these feedback loops and learn about yourself. We’ve got a bunch of cool reports that we built that I haven’t seen anywhere else. It’s just all the stuff I want to know about my own process. Yeah, here’s some other funny stuff. On hold decisions, so things I didn’t sell, but I was thinking about it, these are my impulses that I said like, “Okay, well, I’m not going to do it, but I’m thinking about it.” Turns out that a good business result, which I thought like, “Okay, update on a 10Q seems good. You didn’t really do much.” Things I thought were of good value actually did pretty well. Businesses that I put on watch actually did very poorly. So, I maybe should have been listening to that a little bit more. It was red flags are showing up, but I’m going to give this a little bit more time. That didn’t work out very well.

Tobias: So, you intuitively knew something was wrong, but you should have acted earlier.

Jake: I didn’t. Right. So, there’s a feeling there that I ignored. When I thought the business was almost fully valued, but I didn’t sell it also ended up not doing very well, maybe that’s that debate– Having actual data to support the idea of never sell or not might be a good idea.

Tobias: I’ve got a question from Matt Hansen. “Is this interlinked with other people’s thoughts/journals? Will I see others’ thoughts?”

Jake: Not yet, but we are working on building a shared journaling experience where you could work with other people and have a dedicated shared journal. But for now, it’s just– [crosstalk]

Tobias: Your ideas are private.

Jake: Yeah.

Tobias: Yeah, no one– [crosstalk]

Jake: Everything’s private. Actually, security is very important to us. And so, we can’t see anything that your data actually. It’s all encrypted at rest, and then transmitted to the servers. We can’t see anything. Actually, we have this cool program that lets you see how people are moving around and clicking around, but then it blurs out all of what they’re actually typing and what it says. So, we can see the journey, but we can’t see what’s actually written in there. We can see like, “Oh, people are getting stuck on this particular thing. Let’s like fix that.” But we can’t see what they’re actually writing.

Tobias: I guess this is a question that you probably got to sign up to understand. “But we’d like to see what format this is, how the info is displayed, how the search works. I use Evernote all the time. It’s not ideal the bigger the note–”

Bill: It’s free. Sign up.

Jake: What was that last part?

Tobias: “I use Evernote all the time and it’s not ideal the bigger than note inventory. It needs better search, I think for big note inventories.”

Bill: Yeah, Jake, obviously this is your thing, but I don’t know that I would use it in the same way that I would use Evernote. You definitely could. But I think it’s more specific. If you’re like me, I use Roam for all my thoughts. Yesterday, somebody told me to look at Performance Financial Corp or something. I viscerally didn’t like it, but my notes, it’d say. “Got it from a Twitter DM. Collection of businesses that have little competitive advantage. Check trailing financials. Yada, yada, yada. Decision to pass.” And then I have pass decision, the date, and the reason why. By the way, if anything I said is stupid, please let me know. But it’s a little more security specific and it’s closer to my work process than what I would use Evernote or Roam for it. Do you think that’s fair?

Jake: It’s funny, because this is something we’ve internally debated, because people have it in their head that it’s journaling only and recording decisions. That’s one of the major use cases. Everybody’s using it to record decisions. That’s one of the driving factors. But I personally use it to take all my notes in, because I want to be able to search across ideas and notes to see how there’s interaction and tagging. But honestly, we wondered internally like if the size of the box for input actually drives people to how much do they feel they should be typing in there, there’s these weird psychology things that happen with software that I’ve learned that– It’s not as cut and dried as you would think. It’s not an engineering problem a lot of the time. A lot of times, it’s a psychology problem.

Tobias: And JT, journalytic.com is where people need to go.

Jake: Yes, please. Yeah, journalytic.com.

Tobias: “If you want to migrate your information away from there, is there a process?”

Jake: Yeah, we have the ability to download out into a text file. We might work on something to make it even more user friendly to leave, because I know that’s a big sticking point for people. They don’t want to feel like they’re trapped on a platform. I feel the same way. If I wasn’t personally, my fingerprint’s all over it so much. I would also not want all my stuff to get trapped.

Yeah, I think the other thing I should probably mention is that I think it would be awesome to get a nice group of good investors who are all working on it and then tell me what you want to build. What else do you what else do you want it to do? Because we’re in the stage of still building it out. We’re really just at the minimum viable product today, I would say. And so, what do you think would be cool, how would you want to work with other people, all that stuff, I want to know about it, because that’s what we’re working towards. We want to make it kick ass for people like us.

Tobias: Awesome.

Jake: Yeah, and thank you for letting me have a few moments here to do a little pitch. But it is something that’s near and dear to my heart. I’ve been pouring my heart into it for a couple years now. So, it feels good to finally get it over to this particular finish line, which is finally public.

Tobias: Congrats on making to the start line.

Jake: Yeah, exactly. Yeah.

Tobias: Congrats on starting the race.

Jake: Congrats on starting the marathon.

Tobias: It’s a little bit like having your first kid, like the nine months goes by and then the baby’s born and you are like, “Oh, hang on, that’s just the start.”

Jake: Yeah, we haven’t even done anything yet. [laughs]

Tobias: How do we pivot away? How do we transition out?

Jake: Yeah, let’s just hit us Q&A or we got any other topics?

Tobias: This wasn’t Q&A. I got to– [crosstalk]

You can find out more about the VALUE: After Hours Podcast here – VALUE: After Hours Podcast. You can also listen to the podcast on your favorite podcast platforms here:

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William Blair: Small-Cap Value Has Been Outperforming For 18 Months https://acquirersmultiple.com/2022/12/william-blair-small-cap-value-has-been-outperforming-for-18-months/ https://acquirersmultiple.com/2022/12/william-blair-small-cap-value-has-been-outperforming-for-18-months/#respond Mon, 05 Dec 2022 08:00:11 +0000 https://acquirersmultiple.com/?p=35616 Read More]]> During this presentation, the team at William Blair discuss why small-cap value has been outperforming for 18 months. Here’s an excerpt from the presentation:

Value’s been outperforming, at least in the small-cap arena, for the better part of eighteen months. Before that, we had a really long pronounced period of growth outperformance. Actually, a record high, really if you look at the trailing 10 years going back to conditions that really existed during the tech bubble.

I think really there’s two reasons for that. One, as we came out of the housing, the financial crisis in ’08 and ’09, we had fairly muted, below potential economic growth.

And so, growth was very scarce. Any cyclical stocks really didn’t have much of a tailwind, and therefore I think people did gravitate more towards growth.

And I think probably the second and most important reason is that we had a very prolonged period of zero or near-zero interest rates. Certainly, real rates on inflation-adjusted were in many cases negative.

That creates a lot of cheap money. Investors are willing to invest in companies where profits were very far in the future. I guess what they call now long-duration equities.

So I think it’s really those two things that set up a period of outperformance. But I think if you look back historically, these value/growth cycles can be somewhat long. I’ve really probably been in my career through three of them at this point. So, I think the value cycle does have some room to go.

I think small-cap value stocks are very attractively valued right now.

If you look at the small-cap value benchmark, it trades at around 13 times this year’s estimates, which is a fairly significant discount to small-cap value’s longer-term average, and even more so to large-cap stocks and small-cap growth stocks in particular. We’re trying to find stocks where that’s already discounted the valuation.

You can watch the entire presentation here:

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Bill Nygren: How To Identify And Value Quality Businesses https://acquirersmultiple.com/2022/12/bill-nygren-how-to-identify-and-value-quality-businesses/ https://acquirersmultiple.com/2022/12/bill-nygren-how-to-identify-and-value-quality-businesses/#respond Mon, 05 Dec 2022 07:59:48 +0000 https://acquirersmultiple.com/?p=35611 Read More]]> During his recent interview with The Motley Fool, Bill Nygren discussed how to identify and value quality businesses. Here’s an excerpt from the interview:

Nygren: I recently read an interview with Berkshire Hathaway’s Todd Combs where he said the worst business imaginable is one that grows and needs infinite capital. I thought that was an interesting way to describe it because it shows that worse businesses exist than the typical low-multiple, low-growth cash cows.

Inverting that definition of worst would say the best businesses grow rapidly without needing much capital. Companies that we own or have recently owned that would fit that definition of great businesses would include Mastercard, Moody’s, and Alphabet.

Our process incorporates quality in several ways.

First, our analysts forecast out earnings for the next seven years, then apply a P/E multiple to that seven-year forward estimate that assumes the business becomes average over the next five years.

So, a higher-quality company would be accorded a higher current P/E multiple based on its higher expected near-term growth, higher cash return to owners, and lower discount rate due to lower risk.

Host: When picking stocks, do you consider an upside potential-to-downside potential ratio? If so, what do you look for?

Nygren: Kind of. First, instead of looking at how much a stock should go up if our forecasts prove accurate, we look at what percentage of our estimated business value the total debt and equity of a company currently sell at. Though that might sound like a distinction without a difference, it is a very meaningful difference for levered businesses.

Here’s a simple example: Business 1 has no debt, its market cap is $80 billion and we think it is truly worth $100 billion. If we are right, the stock has 25% upside.

Now consider Business 2, which is also deemed to be worth $100 billion, but it has $80 billion of debt and the stock sells for $10 billion. You could say that if we are right, the stock could double from $10 to $20 billion.

But we would look at those two companies and say Business 1 is cheaper. Its total price is $80 billion whereas Business 2 has a total price of $90 billion. So, we could be off on our valuation estimate of Business 1 by 20% before we were paying the full value, but our cushion is only 10% on Business 2.

We also penalize companies where we believe the range of possible earnings is wider and where we believe management or business quality are less positive. Though we don’t end up with a simple upside to downside ratio, we are trying to measure both upside and downside. We adjust both our buy/sell targets and our position sizes accordingly.

You can read the entire interview here:

Bill Nygren Interview – Motley Fool

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Jeremy Grantham – Top 10 Holdings – Latest 13F https://acquirersmultiple.com/2022/12/jeremy-grantham-top-10-holdings-latest-13f/ https://acquirersmultiple.com/2022/12/jeremy-grantham-top-10-holdings-latest-13f/#respond Mon, 05 Dec 2022 07:59:27 +0000 https://acquirersmultiple.com/?p=35562 Read More]]> One of the best resources for investors are the publicly available 13F-HR documents that each fund is required to submit to the SEC. These documents allow investors to track their favorite superinvestors, their fund’s current holdings, plus their new buys and sold out positions. We spend a lot of time here at The Acquirer’s Multiple digging through these 13F-HR documents to find out which superinvestors hold positions in the stocks listed in our Stock Screeners.

As a new weekly feature, we’re now providing the top 10 holdings from some of our favorite superinvestors based on their latest 13F-HR documents.

This week we’ll take a look at superinvestor Jeremy Grantham (9-30-2022). The current market value of his portfolio is $17,331,001,000 with a top 10 holdings concentration of 25.36%.

Top 10 Holdings

SYM COMPANY VALUE ($000) % SHARES
MSFT MICROSOFT CORP 732,015 4.20% 3,143,044
UNH UNITEDHEALTH GROUP INC 550,823 3.20% 1,090,652
JNJ JOHNSON & JOHNSON 490,488 2.80% 3,002,499
AAPL APPLE INC 472,301 2.70% 3,417,518
WFC WELLS FARGO CO NEW 410,291 2.40% 10,201,175
USB US BANCORP 384,161 2.20% 9,527,792
TXN TEXAS INSTRUMENTS INC 359,751 2.10% 2,324,275
GOOGL ALPHABET INC 341,332 2.00% 3,568,553
KO COCA COLA CO 329,827 1.90% 5,887,674
ANTM ELEVANCE HEALTH INC 324,392 1.90% 714,142
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