WorldlyInvest Weekly #2
Howard Marks' latest memo; How Buffett earned a 39% IRR in an arbitrage situation; Is classic value investing dead?; Lessons from a quarter century of investing; Nintendo investment thesis
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Quote of the Week
There will be bear markets about twice every 10 years and recessions about twice every 10 or 12 years but nobody has been able to predict them reliably. So the best thing to do is to buy when shares are throughly depressed and that means when other people are selling.
— SIR JOHN TEMPLETON
Insight of the Week
Howard Marks’ latest memo
In his On Bubble Watch memo, Howard Marks reflects on past market bubbles and evaluates whether current market conditions, particularly the dominance of the "Magnificent Seven" tech companies, signal a bubble. While today's market shows signs of froth, including elevated valuations and heavy reliance on a few large companies, Marks emphasizes that a bubble is more about investor psychology than specific price metrics.
Read Howard’s full memo HERE
Essential Readings
How Warren Buffett Earned a 39% IRR
In the 80s, Buffett earned a 39% IRR through a low-risk arbitrage deal involving a company acquired by KKR. A great case study by
A Quarter Century of Investing
reflects on his 25 years as a value investor, and he shares valuable lessons for investors.When Principles Don't Work Anymore
Fund manager
discusses that long-term investors must adapt their strategies over time, just as Warren Buffett evolved from buying cigar-butt stocks to investing in high-quality businesses.Weekly Term from The Satirical Dictionary of Finance
COCOA MARKET: The bittersweet tale of 2024: a commodity rally fueled by dwindling supply and unyielding demand. With West African production hit by ageing trees, the cocoa swollen shoot virus, and geopolitical woes, chocolate makers face a supply crunch reminiscent of the 1977 cocoa price boom. Yet, no matter how high prices climb, die-hard chocoholics aren’t about to give up their daily fix.
Recommended Book
Investment Valuation
Do you want to improve your valuation skills?
The bible of valuation is back with a new edition! Once again, profesor
delves into valuation techniques for a variety of different asset classes, including real options, start-up firms, unconventional assets, distressed companies and private equity, real estate, and many more, and explains how to choose the right model for any given asset valuation scenario.Stock Ideas
Nintendo
shares his Nintendo’s investment thesis.Switch 2 Backwards Compatibility: Expected to drive long-term growth and higher-margin digital sales.
World-Class IP Expansion: Movies, theme parks, and mobile games fuel user growth and engagement.
Strong Brand Moat: Loyal multi-generational fanbase ensures sustained demand.
Duff & Phelps
writes the history of Duff & Phelps Credit Rating Co., a company that became a standalone entity in the mid-1990s before being acquired by Fitch Group.Duff & Phelps' credit rating arm leveraged a regulated oligopoly, with limited competition and high barriers to entry, making it a highly profitable business model.
After spinning off its credit ratings arm, the company experienced rapid revenue growth and significant shareholder returns, ultimately being acquired by Fitch at a substantial premium.
Duff & Phelps management effectively used excess cash to repurchase shares, contributing to long-term shareholder value creation and demonstrating strong capital allocation practices.
Reed & Prince Mfg. Co.
tells the history of Reed & Prince Mfg. Co., a company that specializes in manufacturing precision fasteners. The company was founded in 1886 and has remained in family ownership for five generations.Reed & Prince remains a rare example of a business still in family hands after over 130 years, despite a brief bankruptcy and buyback.
The company gained prominence by manufacturing innovative fasteners, including the Frearson screw, which was widely used in WWII aircraft and is still relevant today.
Reed & Prince embraces small-scale, lean manufacturing in the U.S., maintaining strict control over quality and costs by avoiding overseas production.
Thanks for the mention!