Weekly Update: 1/24/21
r/wallstreetbets is outperforming the pros, the intangible economy, Brooklyn Investor is back, "narrative investing," financial journalism and information dissemination in the age of social media
Welcome to Beating the Odds. Our goal is to create and curate content on investing, strategy, tech, fashion and anything else we find interesting.
🔍 Tickers mentioned: MSTR, PYPL, IDXX, MSFT, INTU, FB, NKE, SBUX, LVMUY, ADBE, ADSK, BABA, ABT, TWTR
Meme of the week
From @realjonbovi, “the virgin traditional investor vs the chad emergent growth investor”:
📊 Charts of the week
Brands & intangibles
Ad dollars go digital
K-shaped recovery
Anyone paying attention to the disparity between rising fortunes in capital markets and deeply saddening destruction in the real economy since the pandemic began is already well aware of the “K-shaped recovery” taking place. Bloomberg had a good piece detailing the situation.
As Will and Ariel Durant skillfully illustrated in The Lessons of History, economic inequality is a natural and inevitable tendency. The entirety of history also shows us that such inequities are periodically alleviated by violent or peaceable partial redistribution. It seems we may be close to entering the redistribution phase. The biggest question remains: what method will we as a society choose?
📚 Good reads
Brooklyn Investor — Happy New Year! Bubble Yet? (link)
Brooklyn Investor doesn’t post often, but when he does it’s always worth a read. Trust me—if you only read one thing today, let it be this. My favorite part:
People constantly worry about 20-30% corrections. I don't worry about those at all, and I assume we will have a lot of those over even the next 3-5 years. I don't care about things like that too much. In fact, I don't even worry too much about a 1999-like bubble, because if you look back, if you owned solid, decent stocks and held on through it, you would have been fine. I expect the same going forward.
Nongaap Investing (Substack) — MicroStrategy: From B.I. to Bitcoin (link)
Mike at Nongaap is one of the best minds on FinTwit. This post was not only a fun read, but also a highly informative examination of the role of “narrative” in investing
Fundsmith LLP — 2020 Annual Investor Letter (link)
Companies discussed include PayPal, Idexx, Microsoft, Intuit, Facebook, Nike, Starbucks and LVMH. Investing can sometimes seem complicated, but it really is this simple:
We continue to apply a simple three step investment strategy:
Buy good companies
Don’t overpay
Do nothing
Polen Capital — Portfolio Manager Commentary – December 2020 (link)
Since inception on January 1, 2015, Polen’s growth portfolio has delivered an annualized return of 17.18% gross of fees compared to a 9.67% annualized return for the MSCI All-Country World Index. Their letter highlights numerous companies, including Microsoft, Adobe, Autodesk, Alibaba and Abbott Labs
🎧 Press play
Panic with Friends - Bloomberg’s Ted Merz on Financial Journalism and Information Dissemination in the Age of Social Media (EP.133)
I always love getting to interview people who typically ask the questions. And this episode with guest Ted Merz is no exception. Ted has spent 30 years at Bloomberg, first as a journalist and later overseeing application and product building. Now, he works as their Global Head of News Product. Ted was there at the early days of Bloomberg when financial journalism was at its infancy. It was fascinating getting his perspective on this sector and how it has changed and grown over the years. In this episode, Ted and I talked about how he landed his first role at Bloomberg, the biggest story he’s covered, financial journalism, the value of content, integrating Twitter into Bloomberg, data and more.
“The thing about Twitter right now, and Reddit, is there’s still an enormous opportunity for people with domain expertise who know who’s important or what’s important... but you have to know who to follow.” (Ted Merz)
I joined Twitter in ‘09, took a bit of a hiatus for a couple of years when Instagram started to blow up, then boomeranged back to heavy Twitter usage over the past 2-3 years, but this idea didn’t truly click for me until mid-2019. I completely agree with Ted’s take and believe Twitter is the most powerful social media app if used correctly.
It takes some effort to ramp up, but once you’ve curated a solid list of accounts to follow, tweeted/liked/retweeted enough content for the algorithm to recognize your interests, and figured out how to utilize Twitter Lists (the most underappreciated feature in my opinion), you’re good to go.
Just like any social media platform, trolls and bots exist. But dig deep enough, and there is a wealth of knowledge out there. I’m just a random guy on the app, yet I’ve somehow managed to leverage it to meet a top American menswear designer and interact with some of the world’s smartest investors.
If you’re interested in finding accounts that riff on capital markets and stock talk, I got you: here’s my list of ~375 FinTwit accounts. You can follow and/or pin the list to save it. It’s hard to overstate how much I’ve learned from these people. And it’s free!
📺 Video of the week
Excess Returns — Monopolies, Intangible Assets and the Disruptive Economy with Kai Wu of Sparkline Capital (Ep. 53)
Our economy is changing. The largest, most successful companies in the world no longer require substantial tangible assets to operate their businesses. The businesses that are disrupting our world and wielding monopolistic power aren't powered by plants and factories. Instead their value lies in things like brands and technology and the value of their networks.
This new world has challenged many traditional beliefs about investing. Everything from how we define value to how we look at growth has changed. More traditional methods are now being supplemented by things like alternative data and machine learning.
In this episode, we speak to Kai Wu of Sparkline Capital, who has written some of the best research we have seen on these topics.
We discuss:
- The forces causing disruption in our economy and how to measure its impact;
- How to measure intangible assets using both traditional fundamentals and more advanced metrics;
- The rise of monopolies and the implications for investors;
- The impact of all of this for investors who use traditional fundamental strategies.
Kai is one of the leading thinkers when it comes to investing in the intangible and disruption economy. I’ve found his research to be highly impressive and this video was no different. Countless gems were dropped throughout the interview. All of Kai’s research is available on the Sparkline Capital website.
Big earnings week ahead
Disclosure: None of this is investment advice. I own MSFT, FB, LVMUY, ADBE and BABA shares.
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